Pension systems around the world faced a “stress test” during the pandemic—what you might call the “pension pandemic paradox.”

On the one hand, there was pressure to allow access to pension savings as emergency support during a period of sharp economic downturn. This was understandable, since for many people pension savings are their biggest financial asset. But, in some countries, this turned into unprecedented access beyond immediate emergency needs and put the pension savings system at risk. The most notable case was pension reform trailblazer Chile. A whopping $50 billion—approximately 25 percent of pension savings representing nearly one-fifth of Chile’s GDP—was withdrawn from the system during 2020 and 2021.

With the challenge of financing the Sustainable Development Goals and Paris Agreement still ahead of the world, our pension systems—like our architectural heritage—deserve to be preserved.

On the other hand, the long-term domestic capital that our pension savings represent was used to support short-term emergency measures. For example, Dutch and other European pension funds purchased “COVID-bonds” issued by the Nordic Investment Bank. CDPQ, which funds pensions in Quebec, joined the effort to support local enterprises impacted by the crisis.

And these funds are needed to support longer-term structural imperatives such as the transition to a low-carbon economy. Before the COVID-19 crisis, it was estimated that an approximately $2.5 trillion investment would be needed for developing economies to achieve a low-carbon transition and tackle the climate crisis. The Organization for Economic Cooperation and Development estimates that, post pandemic, this has increased to $4.2 trillion. To put that in perspective, the annual lending capacity of multilateral development banks is less than 10 percent of this. The patient capital of long-term investors across the world—managed most notably in pension and insurance funds—will be indispensable for financing this transition.

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