European pension investment institutions have “material exposure” to climate risks, according to stress test results released today by the European Insurance and Occupational Pensions Authority (EIOPA), the EU’s insurance and pension-focused financial regulator. Launched in April, EIOPA’s first climate stress test was designed to assess the resilience of European institutions for occupational retirement provision (IORPs) to a scenario of sudden, disorderly transition to climate neutrality due to delayed policy action. The scenario envisioned a sharp increase in carbon prices, leading to a strong increase in fossil fuel prices, raising energy costs, impacting the general economic outlook, and pressuring equity markets, particularly in carbon intensive sectors. Other effects anticipated by the scenario included rising corporate credit spreads for brown industries, rising yields increasing the cost of issuing sovereign debt, and a slowdown in the value growth of tangible asset classes, such as real estate. Read More