Al Gore, the former US vice-president turned climate change campaigner, yesterday challenged pension funds to "systematically integrate" sustainability into their investment decisions.

Addressing the investment conference of the National Association of Pension Funds in Edinburgh, Gore said institutional investors were "key players in helping to shape the overall posture of our economy and industrial or post-industrial civilisation" and their spending influence dwarfed that of governments.

Gore, who is chairman of London-based Generation Investment Management, told the NAPF that the widespread changes in assumptions on longevity were part of a bigger picture.

"I believe very deeply that we are now in an era of history that has very suddenly rushed upon us that has some very different characteristics, including a number of changes that in the past we would have associated with long-term cycles, but are actually occurring more swiftly than we would have expected a few years ago." He added: "The climate crisis is, in my view, by far the most important of those."

Gore said: "Sustainable investing has a hand in glove linkage with long-term investing, if the market has suffered from short-termism it has also suffered from a routine setting aside of many important sustainability factors."

He said sustainability covered treatment of staff and relations with communities as well as environmental impacts, adding: "A company whose performance is building up a deficit of environmental damage - that is bound to insinuate on the company's finances, by social demand, law-suits, or a carbon tax, for example."

Gore said there was now emerging a "fiduciary obligation for any trustee or manager responsible for matching asset performance to truly long-term liabilities to look more carefully at the impact of this onrushing climate crisis."

He said pension funds purported to be long-term investors but exerted pressure on their managers and their investee companies to perform on a quarterly basis. The short-termism was reflected in the way managers were paid, and in response to a question Gore suggested linking manager remuneration to a "three-year cycle".

He told delegates: "Thirty years ago, in my country, the average holding period for equities was seven years and now the average mutual fund turns over 100% of its portfolio in less than 11 months."

He added: "There are lots and lots of businesses whose plans are blind to the carbon consequences of what they are doing."

There was also too much pressure on quarterly earnings performance, which was inhibiting companies from investing in more eco-friendly processes, even when they met internal return targets. "Companies need to be given incentives to speed up the replacement of technology."

Gore concluded: "If you do truly invest on a long-term basis, then it's easy and more profitable to fully integrate sustainable factors into your analysis. We have everything we need to make this transition with the possible exception of the will to act, but the will to act is a renewable resource."

l The NAPF will today submit its response to the government's consultation on the personal pension accounts due to arrive in 2012.

Nigel Peaple, director of policy, said there was widespread support, including from the TUC and Which?, for its proposal for a "quality mark" to be introduced in the meantime, for pension schemes with contribution levels of at least 10%. He said: "We are determined to keep it very simple."