Note: this article was originally published on on March 9, 2024

Climate change has not yet broken through as a bipartisan issue. Surveys from Gallup and the Pew Research Center indicate large gaps between Democrats and Republicans in their views of the immediacy and importance of climate change.

Retirement security, on the other hand, is most certainly a bipartisan issue, earning high levels of concern among members of both parties. The National Institute on Retirement Security found that 79% of Americans surveyed agree that we have a retirement crisis, up 12 points since 2020. It might be time to emphasize the scary links between climate change and your retirement portfolio.

Chances are that you are a diversified investor. Your retirement portfolio may own large chunks of single stocks. But if you are prudent then part of your portfolio also consists of diversified index funds, or other mutual funds or ETFs that hold a wide array of assets.

In that case, your nest egg is directly exposed to the wider economy, because gross domestic product (GDP) growth translates into the growth of corporate profits. Corporate profits translate into the earnings per share of the corporate sector, which—holding valuations constant—translate into how much the stocks in your portfolio move up or down. GDP might still go up but the financial obstacles presented by a changing climate will constrain the measure’s growth rate. That means the potential to build your wealth is impaired.

Climate change impacts the economy in a number of nefarious ways. The most notable obstacles are the current and growing instances of climate-related natural disasters. Insurance companies are keenly interested in forecasting and tracking climate-related disasters for obvious reasons, and the second-largest reinsurer in the world, Swiss Re Ltd, reported in late February that climate-driven increases in hurricane, thunderstorm, and tornado damage are currently depressing U.S. GDP by almost 0.4%. Without more serious intervention, the world could lose up to 10% of GDP by mid-century, just from natural disasters. Many of us will still be working, or relying on our retirement portfolios within that time range.

If climate-related disasters continue to climb, the situation will likely precipitate a governmental response (in the rest of the world, if not in the U.S.). As policymakers around the globe clamp down on heavily emitting corporations, many of them too slow to adapt, their profits will be affected. This phenomenon is known as transition risk. Your retirement providers are working away to estimate the hit that they will take from the combination of climate-related natural disaster and transition risk. Pension funds and regulators in the U.S.Canada and the EU agree that the picture isn’t pretty. Duly deduct 10-15% from your savings, to reflect the declines in asset prices that pension experts believe will result from these climate risks.

Additionally, there is widespread concern that the models which your retirement fund trustees use to estimate these damages are far too optimistic. And none of this takes account of the fact that climate change is intertwined with a host of other costly financial risks, such as mass migrationsocial unrest, and agricultural instability. Your portfolio is facing a difficult future.

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You may be experiencing climate-related financial threats right now. One of the biggest fears about the value of retirement accounts is inflation. Have you noticed that your auto insurance premiums are on the rise? The increase in climate-related weather disasters is one cause, Capital OneCOF +0.6% notes. Premium increases are also projected for your homeowners insurance, a recent Associated Press report explained. If you are a small-business owner, Travelers highlights how the same forces impact your commercial property insurance.

Because insurance is so pervasive in our economy, premium hikes ripple through into the wider Consumer Price Index. A recent BlackRock report confirms: “Delayed transmission to the CPI means that the large, impending homeowners insurance premium rises this year and next year poses future upside risks to services inflation in the US.” While you may not think climate change is a serious problem, your insurance provider does. And because your insurance provider is responding with continuing rate increases, you have to be concerned, too.

Fortunately, you have alternatives to wringing your hands while you watch your nest egg implode. Everyone with a retirement account has someone to turn to for help: your retirement fund trustee, in other words your fiduciary. Fiduciaries play unique roles in the U.S. economy, and they have deep responsibilities, “the highest known to the law” according to the U.S. Court of Appeals.

One of these responsibilities is the duty of loyalty, which means that fiduciaries can’t place their own interests ahead of yours. Another is the duty of care. This means that your fiduciary must make prudent investment decisions that, among other things, minimize large losses. Are you confident that your fiduciary is doing that?

In fact, it is entirely possible that your fiduciary has no idea that climate risk is something to reasonably try to mitigate. Fiduciaries can speak to your companies about their risky behavior, a process known as engagement. Fiduciaries can vote for or against corporate directors and corporate remuneration reports, or support shareholder resolutions calling for lower contributions to climate risk. Fiduciaries can even withhold financing for the worst offenders.

If you’re concerned about climate change already, you’re probably looking for ways to act. If you aren’t yet concerned about climate change, you are probably concerned about having enough money to live on once you stop working. Everyone knows that they can contact their Congressperson to express their views on policy. How many of you have contacted your fiduciary to express your views on your financial future?