UK pension schemes fund an estimated 330m tonnes of carbon emissions every year according to new research.
This analysis, by the campaign group Make My Money Matter and research house Rote2, says UK schemes are still investing an estimated £112bn into fossil fuels. It says this equates to around £60 for every £1,000 invested in UK pensions.
The group is calling on the government to make net zero mandatory for pension funds at COP26 to drive urgent emissions reductions.
It says at the current rates the pensions industry would need to reforest 50 per cent of the UK’s landmass to offset these emissions. It also points out that if the UK pensions industry was a country, it would find itself in the top 20 carbon emitters globally.
MMMM, founded by the film maker and activist Richard Curtis, says some schemes have begun to take climate risk more seriously, and around £800 billion in schemes now committed to robust net zero, voluntary commitments are not going far enough.
However research published earlier this month shows 70 per cent of leading UK schemes have not made robust net zero commitments, leaving almost £2 trillion invested in schemes which are yet to align with the Paris Climate Agreement.
Curtis says: ““When you think about pensions, you hardly ever think carbon emissions. But our report turns that on its head. With pensions enabling emissions which exceed the UK’s entire CO2 output, the message couldn’t be clearer: the time for green pensions is now. Because if we fail to lower the emissions of our pensions, we will fail to prevent the worst effects of catastrophic climate change; jeopardising the very futures our pensions should be saving for.
“While we’ve seen green shoots of progress with voluntary net zero commitments, £2 trillion remains in schemes which have failed to act, undermining the UK government’s own net zero targets. That’s why we believe it’s time for the government to make net zero mandatory for all pension schemes, and make sure the trillions in our pensions helps tackle the climate crisis, not fuel the fire.”
Route 2 founder Daniel Dias adds: “While pension funds do not directly produce significant greenhouse gas emissions, the way they allocate their capital has a significant impact on the long-term behaviour of the companies and countries they invest in.
“Our analysis has shown that, because of the vast sums of money that they are responsible for, the levels of GHG emissions that they have influence over is significant. It also demonstrates that selecting pension schemes that are more climate sensitive is an effective tool in combatting climate change.”