Disclaimer: Pawprint is not a financial advisor. We encourage our readers to speak with registered professionals before making choices about their investments
Pushing for an ethical pension for your workforce just makes sense.
- It will accelerate your organisation’s climate commitments (‘investments’ fall under scope 3, which SBTi’s Net Zero Standard now calls us to take responsibility for).
- It ensures your investments are aligned with your values (you can hardly put ‘we’re committed to greening our business’ if your pension is investing in fossil fuels).
- It signals to employees that you care about their futures.
In this article, we take a closer look at the current state of the UK pensions industry, what an ‘ethical pension’ looks like, and how you can go about getting your workforce onto a pension that actually invests in their future.
According to Make My Money Matter (MMMM), switching to a green pension is 21 times more effective at reducing your carbon footprint than eating a plant-based diet, giving up flying or swapping to renewables combined. If that’s not a brilliant reason to read on, what is?
What’s happening with our pensions?
The total value of the UK’s Pension Schemes’ Assets Under Management (AUM) equaled £2.7 trillion in 2019. MMMM calculated that this enabled more CO2 than the entire UK carbon footprint in that year. Yikes.
So a lot of the money we’re saving for our future is actually endangering it -- your pension could be investing in anything from fossil fuels to tobacco, exploitation to extraction.
The good news is there’s something that you as a business leader can do. MMMM outlines what that is perfectly, so I’m not going to reinvent the wheel. Here’s what they suggest:
- Ask your pension provider to lead on responsible investment. Quiz them on how they’ll achieve net zero emissions, how they’ll increase their positive impact, and use their shareholder rights to get companies to perform better. I recommend setting a deadline for when you need to see these commitments by, and if they don’t meet it then initiate the move to a new provider.
- Empower your employees by telling them where their pension money is going, and engaging in a dialogue about where it could go in the long term. Encourage them to put pressure on your provider too.
Many pension providers have already heard this call to arms. In July, 14 UK pension funds -- which collectively manage £268 billion between them -- committed to halving their portfolio emissions by 2030 and reaching net-zero by 2050 (Edie). They joined the organisations that MMMM’s #NetZeroHero campaign had already got to: PensionBee, Scottish Widows, Nest, Aegon, Phoenix Group and AVIVA.
Of course, while these are major wins, there’s still work to do. According to MMMM, 70% of leading pension funds are yet to commit to robust climate targets.