UK pension funds have at least £10.5bn invested in companies which are extracting or burning coal according to new research.
This comes despite pledges by many leading DC providers to reduce exposure to the most polluting types of fossil fuel, as part of wider sustainability commitments. This includes investments into thermal coal, tar sands and arctic drilling.
This new research comes as the House of Lords prepares to debate the Pensions Schemes Bill, with one key amendment seeking to require schemes to divest from thermal coal. This is due to be debated later this month.
Those compiling this report and backing the amendment point out that coal is a major driver of the climate crisis, and these investments pose unacceptable risks to both pension savers, and the environment.
Economists and campaigners have long warned that coal and other fossil fuel investments risk becoming “stranded assets” as global energy systems shift towards cheaper, cleaner sources such as solar and wind. Continued exposure to fossil fuels therefore poses growing financial risks to pension savings, as well as undermining wider climate goals, that have been set by the vast majority of UK multi-employer pension schemes.
Corporate Adviser Sustainability report, due to be published next month, shows that 12 out of the 19 multi-employer DC pension funds fully exclude investment into polluting fossil fuels, such as coal and tar sands.
The UK is one of the world’s first major economies to phase out coal power, with the last coal fired power station closing in 2024. Both Conservative and Labour governments have both pushed for other countries to follow the UK’s lead.
In the UK greenhouse gas emissions from the UK’s power sector fell steeply between 2019 and 2025 – cutting 17 million tonnes of CO2, the equivalent to taking around 10 million petrol and diesel cars off the road. This was driven largely by an increase in renewable energy and the phase out of coal.
However, according to this research, this drop in emissions might be eclipsed by a similar level of annual emissions from coal extraction and burning being funded by UK pensions funds overseas.
The amendment has been tabled by Lord Sharkey, previously the chairman of the Liberal Democrat General Election campaign during the 2010 general election.
Lord Sharkey says: “The UK is rightly proud to have eliminated coal from our own energy mix. It is absurd that our pension funds continue to finance its expansion and use overseas.
“Coal is hugely destructive for the climate and nature, and it is also a risky investment. Divesting from thermal coal is in the interests of both pension savers and the planet.”
Baroness Hayman, who is also supporting the amendment, adds: “Many pension funds are already taking a risk-based approach to reducing their exposure to coal and other fossil fuel investments. Parliament now has an opportunity to put in place proportionate, practical legislation to support an orderly transition across the sector to protect pension savers from the growing financial risks of continued reliance on fossil fuels.”
Baroness Griffin, who is also supporting the amendment, said: “Thermal coal is the ultimate short term investment – so how can it be in savers’ interests that our pensions continue to back it? We need to take the eminently sensible step to require pension schemes to phase out investments in the most polluting fossil fuels on the basis of their financial risk.”
Marloes Nicolls, head of advocacy at the Finance Innovation Lab, which was involved in the research, said: “People want to retire with a decent income and a liveable planet, yet our research shows pension providers are continuing to invest savers’ money in industries that threaten both. We hope the government will listen to the growing call to move UK pensions out of coal once and for all.”
A spokesperson from Leave It In The Ground, who analysed the data from the different pension funds, said that the scale of coal exposure was greater than expected: “We anticipated that some pension funds would still be invested in coal, but we were surprised to find that this remains the norm across much of the sector. Limited disclosure makes it difficult to calculate the full scale of the problem, which just underlines the urgent need for greater transparency.
“Pension savers have a right to know how their money is invested – and a right to expect that it won’t be harming their own long-term interests.”