Council pension fund and Hymans challenged in court over climate risk assessment

The campaign group ClientEarth has filed a claim for judicial review against the £1.81bn RBKC Pension Fund and its actuary, Hymans Robertson, accusing both of failing to meet minimum public law standards on measuring climate risks accurately in their latest triennial valuation.

The challenge comes as RBKC has reduced the council’s employer contribution rate to 0%, due to being 175% funded. Hymans Robertson had not endorsed the move to cut contribution rates and advised against it. 

ClientEarth argues that RBKC's decision failed to consider climate risks properly, thereby putting the long-term funding health of the scheme at risk.

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“The claim alleges that instead of looking at the statutory material, the analysis carried out by Kensington and Chelsea appears more superficial than that and instead provides a sensitivity analysis that doesn’t appear to reflect temperature pathways or take into account the long-term timeframe required,” said Alex Bennett, a lawyer for ClientEarth leading the case.

A Kensington and Chelsea Council spokesperson said: “ClientEarth has issued an application for judicial review relating to the administration of the Royal Borough of Kensington and Chelsea Pension Fund. The council is considering the matters raised carefully and it would not be appropriate to comment further while this matter is subject to litigation.”

A spokesperson for Hymans Robertson also declined to comment, citing client confidentiality. “We cannot comment on this matter due to client confidentiality, given it is specifically related to a client.”

Climate risk modelling under fire

RBKC does disclose a climate change scenario analysis in a one-page appendix as part of its latest triennial valuation, which breaks down climate risks in three different scenarios, ranging from “positive reaction” whereby climate change is challenged, to “delayed reaction”, to “negative reaction” whereby no action on climate change is taken.

Even in the most negative scenario, RBKC predicts that the worst outcome for the fund would be a negative return of -0.5%, the analysis does not include timelines.

Similar climate change risk modelling for pension funds has come under fire before. A 2023 report by Carbon Tracker warns that many pension funds rely on climate risk models from major actuarial firms which suggest that even global warming between 2-4.3°C will have only a minimal impact upon their portfolios, despite scientists warning that even a 1°C temperature rise could trigger catastrophic “tipping points.”

In an attempt to mitigate these shortcomings, the Scheme Advisory Board, a standard-setting body for the UK’s public sector pension funds, updated its guidance on climate risk modelling last year, recommending that funds include multiple climate scenarios, temperature pathways, as well as detailed inflation and return forecasts.

ClientEarth argues that RBKC’s modelling failed to meet these recommendations.

Funding level boost

The UK’s local government pension funds assess their financial health on a triennial basis. Hymans Robertson advises more than half of all LGPS funds in the UK. Higher bond yields on global markets have bolstered LGPS funding levels in recent years, leading to growing political pressures on pension funds to cut employer contribution rates in a bid to support cash-strapped councils.

Commenting on this challenge, Bennett stresses: “The claim isn’t primarily about the contribution rate, it is about climate risk, and it is about the risk to the pension scheme, and whilst a surplus may be evident now, that doesn’t mean that material risks can be ignored.”

If the judicial review succeeds, RBKC could be forced to restart its triennial valuation using a corrected methodology. In the meantime, decisions on contribution rates and investment strategies tied to the valuation could be put on hold.

So far, there has been no precedent on LGPS funds being forced to re-run their entire valuation. However, in the 2015 McCloud case, funds had to adjust their liability calculations to include allowances for the remedy, impacting deficit recovery plans and contribution rates retrospectively. While the decision was taken more than a decade ago, funds are still grappling with the logistical implementation.

Global context

Globally, climate risk mismanagement has become a recurring theme in court cases against pension funds in recent years. While ClientEarth’s claims are based on UK public law governing the LGPS, cases elsewhere have drawn on fiduciary duty and its interaction with climate risk.

Most recently, in October 2025, four young members took Canada’s largest pension investor - the Canada Pension Plan Investment Board – to court over alleged breaches of fiduciary duty linked to mismanaged climate risks.

The applicants argued in the legal filings that CPPIB ‘is currently failing to prudently identify, assess or manage climate-related financial risks’. Supporting arguments cited investments in fossil fuel expansion and inadequate third-party climate risk modelling resulting in ‘implausibly low’ loss estimates.

The legal argument in the CPPIB case also draws on the duty of even-handedness and posits that pension funds have an obligation to invest in the interest of intergenerational equity. Since all four members who filed the case will retire after 2030, the case alleges that they will disproportionately face financial losses from mismanaged climate risks.

ClientEarth’s line of argument echoes such concerns. “By ensuring a lawful process is followed, the case is trying to safeguard public funds that are being used for the futures of public sector workers, many of whom are very young and are going to be relying on their pensions in 50, 60, 70 years' time”, explains Bennett.

The CPPIB case, which also takes aim at climate risk management by pension funds, is the world’s first court case that brings into question the duty of even-handedness.

The theme of fiduciary duty and climate risk management has also featured in previous cases against Korea’s National Pension Service and Australian superannuation fund Rest.

Although the case of RBKC and Hymans is structured around different legal tenets, it is set against the backdrop of increasing legal scrutiny over pension funds and their approach to climate risk management.

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