Why pensions are the new frontier in tackling the climate crisis

By David Hayman

There’s £3 trillion invested in UK pensions, and that’s money owned by all of us. That’s more than enough to help deliver the Paris Climate Goals, support research into new vaccines, or fund critical green infrastructure.

But while investing in many vital businesses, pension funds have also been fueling some of the most unsustainable industries on the planet. From tobacco to fossil fuels, weaponry to gambling, pension funds have invested trillions on our behalf without asking us the crucial question – do these investments create a world we actually want to live in?

This has left us accidental investors in the practices we avoid and the causes we fight against. Why is it that the UK’s 3.5 million vegans are investing in factory farming? How can it be that doctors help fund the tobacco industry? And why is it that the pensions of our most sustainable businesses and greenest MPs contribute to coal mining, oil extraction and deforestation?

In the short term, our money is contradicting our values. But more worryingly in the long term it’s undermining the viability of the very futures we’re saving for.

For purpose-led business, this issue is doubly important. As organisations take important steps to reduce their carbon, increase their impact and deepen their connection to society, contradictions exists between these practices and the impact of their money.

Private sector company pensions schemes totalled more than 1,800 billion last year, yet few make any effort to align their corporate sustainability activities with their pension contributions. This in spite of the fact that switching a defaultpension into a green fund is 21 times more effective at cutting your carbon than giving up meat and quitting flying.

This represents a multi-billion-pound gap – with sustainability commitments on one hand, and the contradictory impacts of pensions on the other. Why serve vegetarian meals in a canteen if your pension is invested in factory farming? Why install renewable energy across your buildings, but continue to invest in coal? Why build a brilliant sustainability strategy, but not use the most powerful weapon you have – your pension.


wind turbines


But it doesn’t have to be this way. Business can reverse this trend and capitalise on an enormous, untapped opportunity for impact. Companies and their employees invest up to £20bn through pensions each year – money which could be directed toward clean energy, affordable housing, medical research and green infrastructure. Money which could help build a world fit for their employees’ retirement.

That’s why Make My Money Matter launched the Green Pensions Charter, an ambitious call to action to ensure all company pension schemes help tackle the climate crisis, not fuel the fire. Since we launched this Charter, we’ve had leading employers – from Tesco to IKEA, WWF to Oxfam – sign up to green their pensions. And with new organisations signing up every day, pensions have become the new frontier for sustainability minded businesses.

We believe that if all companies align their pensions with their values, we could ensure the billions invested through corporate pensions help build a better world. And why wouldn’t you – after all, what’s the point of saving for retirement in a world on fire?

For more information on the Make My Money Matter campaign, and to sign up to the Green Pensions Charter, please see here.