The impact that the human race is having on the environment is hard to ignore. Extreme weather events around the world mean that environmental disasters never stay off the front page. But can your pension help solve the climate crisis?
With £ 2.6 trillion invested in UK pensions alone, it may well be that your pension is the secret superpower that can fight climate change. The rise of green pensions has shown that many UK investors are thinking along the same lines.
Here, I need to find out what a green pension is, how your pension is invested and which providers are trying to make a difference.
What is a green pension?
A ‘green pension’ is one that has a positive impact on the environment and contributes to a more sustainable future.
Many of us are accidental investors through our retirement savings. This means you may not fully understand the impact it can have on your pension scheme.
Adopting the green method means you should not invest in companies that are contributing to the climate crisis. So you avoid fossil fuel companies or businesses whose environmental practices are bad. Instead, you invest in things like renewable energy, electric vehicles and textile waste reduction.
Where is your pension invested?
Do you know where your pension is invested?
Cushion’s study found that the average UK pension pot unintentionally emits an average of 23 tonnes of CO2 per year through investments in businesses.
In the case of your pension it can be very easy to survive in the ignorance of happiness. But the more aware you are, the more you can be in control. Most people have a defined contribution called a pension scheme. This is where your pension company invests your funds on your behalf.
If you do not specify with your provider where you want to invest, your money will be kept in a ‘default’ fund. These funds often follow an index like the FTSE 100.
Therefore, if you want to deal with climate change with your pension, you need to specify the type of funds you want to invest. Suppliers often offer ‘ethical’ or ‘fossil fuel free’ options.
Which provider is making a difference?
The pension scheme is changing. Is trying harder to tackle climate change and has a focus on the environment, social and governance (ESG).
The National Employment Savings Trust (NEST) – the UK’s largest pension provider – has distanced itself from fossil fuels this year. Instead, it has diverted £ 5.5 billion worth of investments to ‘carbon-conscious’ companies.
Cushion has its own net-zero fund. And other online investment providers also have pensions that have a socially responsible focus. For example, WealthSimple gives you the option to put your money into socially responsible initiatives that are important for ESG factors as well as performance.
And if your pension provider is not yet committed to net-zero emissions, you can move on to Make My Mater Matter and give them a look.
Was this article helpful?
The Motley Full UK site offers some offers from our partners – how we make money and keep this site going. But does it affect our ratings? No. Our promise is to you. If a product is not good, our rating will reflect it, or we will not list it at all. Also, while we aim to feature the best products available, we do not review every product on the market. Learn more here. The above statements are not provided or approved by Motley Flower alone and by bank advertisers. John McKee, CEO of Whole Foods Market, a subsidiary of Amazon, is a member of the board of motley flowers. Motley Full UK has recommended Barclays, Hargreaves Lansdowne, HSBC Holdings, Lloyds Banking Group, MasterCard and Tesco.