We need to talk about your pension fund. If those words make you switch off, then you aren’t alone. We all know pensions are important, mine are stacked neatly in a box, but I often can’t summon up the effort to read the rather impenetrable language, or the go through the umpteen options on recorded message to find out what my money is actually invested in.
But pensions could be the next frontline in the fight against climate change. Add up the value of all pensions worldwide and you get an astonishing figure of over $50 trillion, or nearly £40 trillion. Where is this money being invested, who am I receiving money from and what am I supporting? While the answer can be difficult to work out, we absolutely know that pension funds are directly involved in funding deeply damaging projects, such as deforestation, burning fossil fuels, or drilling for oil.
The money we put aside in our pension pot is meant to keep us safe and well in older age. But the way it is being spent today puts our children’s future in doubt. Climate and ecological breakdown are the most urgent issues all life on our planet faces. To combat this crisis, we have to follow the money trail and cut the funding off at its source. The buck often stops at your pension fund.
Pensions could be the next frontline in the fight against climate change.
So, what can we do about it? Good Energy has partnered with a new campaign called Make My Money Matter, founded by film director Richard Curtis. The campaign seeks to raise awareness and supports investments which have a positive impact on the planet. They are asking people to sign a petition calling on all UK pension funds to ensure their default fund commit to net zero emissions by 2050. You can sign the petition and become a ‘Net Zero Hero’ here.
I was also keen that Good Energy used its position as an employee and advocate for zero carbon to work behind the scenes, pressuring the industry to do more about the problem.
I recently contacted 54 pension schemes which together hold ‘assets under management’ worth £2.9 trillion. We asked them simple questions about their policies: Do you consider the environment or climate change when making investments? Does the scheme have a commitment to reach net-zero emissions? What steps are you taking to consider the impacts of climate change?
These are all questions every pension fund should have strong answers to, and the risks of climate change should be central to what they do. Unfortunately, we only received seven responses, three of which directed us to their website.
The industry is clearly lagging behind in tackling the problem. Change needs to happen rapidly.
This isn’t good enough and shines a light on how the industry continues to hide behind unfathomable language and is clearly lagging behind in trying to tackle the problem. Change needs to happen rapidly. We believe the following measures will support the whole financial sector move in the right direction:
- A strong and widely accepted definition of what investments support the environment and cut carbon emissions. This will stop greenwashing.
- A set of strict and measurable environmental targets for investors.
- Greater transparency so people can see where their money is going.
- Fines for pension funds which do not comply to encourage the right behaviour.
Recent announcements show things are starting to change. The government has said all large financial companies will soon have to report on their exposure to climate risks within a few years. And following the launch of Make My Money Matter, big pension funds such as NEST and Aviva, have publicly committed to divesting from fossil fuels.
This is great news, but it needs to act as the starting gun for the whole sector. The measly response to our letter shows how far the industry needs to go if we stand a chance of halting dangerous climate change. After all, what good is a pension if there isn’t a planet to live on?