The Royal Borough of Kensington and Chelsea Council is facing a High Court challenge over its decision to reduce employer pension contributions to zero percent for three years, with environmental law charity ClientEarth arguing the council failed to properly consider climate-related financial risks.
Background of the pension contribution pause
The West London local authority announced in 2025 that it would stop paying into the Local Government Pension Scheme (LGPS) for three years, citing that the fund was overachieving its investment targets. The move effectively suspended employer contributions, which are typically a significant portion of pension funding.
ClientEarth, which has brought the legal action in the form of a judicial review, is specifically challenging whether the council and its actuary, Hymans Robertson, met public law standards when assessing the financial risks posed by climate change to the pension fund's investments.
Climate risk and pension fund vulnerability
It is widely acknowledged that climate change could have a massive impact on the value of pensions in the future. Experts argue that the financial implications of climate change are likely to be felt before the full physical effects materialize. This means investment values could drop significantly as markets begin to factor in how climate change may affect the economy.
Mike Clark, Founder Director of investment advisory Ario Advisory, said: “The systemic financial risks of climate change - relevant to pension funds - are more present and dangerous than the Earth Science tipping points which are probably some way off, though very scary.”
A report by the Institute and Faculty of Actuaries (IFoA) warns that the global economy could face a 50 percent loss in GDP between 2070 and 2090 unless immediate policy action is taken on risks posed by the climate crisis.
ClientEarth's legal arguments
ClientEarth's case argues that climate change is a material risk that must be considered when analysing pension fund performances, especially when deciding the level of pension contributions employers make. The charity contends that the council and its actuary failed to properly assess and explain climate risk in the 2025 valuation and the related contribution decisions.
Alex Bennett, Lawyer at ClientEarth, said: "This case gets to the heart of how public pension funds assess climate-related financial risk – one of the biggest risks facing our financial system. Local Government Pension Scheme funds carry long-term obligations to their members, and decisions taken today can shape funding resilience for decades."
Bennett added: "ClientEarth is asking the court to review whether Kensington and Chelsea Council, and its actuary Hymans Robertson, met the minimum legal standards required when assessing and explaining climate risk in the 2025 valuation and the related contribution decisions. The case is not asking the court to set contribution rates. It is about whether the legal process for assessing material long-term financial risks was followed properly."
Council's response and implications
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."
The case could serve as a warning to decision-makers that there may be legal risks if they mismanage the financial impacts of climate change in pension fund management. It highlights the growing scrutiny on public bodies to integrate climate risk into financial decisions, particularly for long-term obligations like pension funds.
