There are so many well-meaning and committed groups of people fighting the climate crisis in the UK. People who are choosing to go vegan or stop flying to reduce their carbon footprints — or even going out and taking direct action with groups like Insulate Britain, Extinction Rebellion, or Just Stop Oil.
But, despite all of this climate action and changing of lifestyle habits, there is one thing through which many of us could still be inadvertently funding the fossil fuel industry. What is it? Our pensions.
Many of us could still be making monthly payments into pension funds that continue to fund the fossil fuel industry and, although you might not know it, switching your pension to a more eco-friendly option can be very easy and could help cut your carbon emissions by 21 times more than going veggie, giving up flying, and switching energy provider.
It’s the lack of awareness about this that David Hayman, the campaign director of Make My Money Matter, a nonprofit fighting for green pensions, says really sparked the idea for their campaign, which was co-founded in 2020 by film director and Global Citizen Prize winner Richard Curtis.
There’s about £2.7 trillion being held in pension pots in the UK and where that money goes is something that most people have very little knowledge of, or control over. But finding out more about your pension and what it’s doing could be key to getting your money to help the environment, rather than damage it.
Pension providers invest your money on your behalf. Ideally, the money will have been invested well and you can retire with a decent amount. But many are failing to help you prepare for the future in one very important way: they are investing in extractive oil and gas companies that are contributing to making the future, frankly, a far more dangerous place.
Make My Money Matter revealed in an October 2021 report that 70% of leading UK pension providers have yet to set robust net zero targets. Together they fund an estimated 330 million tonnes of carbon emissions every year. Extraordinarily, if the UK pensions industry was a country, it would find itself in the top 20 carbon-emitting nations.
It’s not just carbon emissions. Make My Money Matter has found that £2 in every £10 you save in a pension is linked to deforestation and 31% of pension equity and corporate bond investments goes to companies with a deforestation risk, further putting the health of the planet in danger.
Make My Money Matter is calling on UK pension funds to do better — in all sorts of ways. They are calling for more transparency, so that consumers are more informed on where their money is going and whether it is having a positive or negative impact on the world.
They are also calling for pension providers to set net zero targets, divest from the fossil fuel industry and other damaging industries like weapons manufacturing and tobacco, and commit to deforestation-free portfolios.
Hayman told us more about the fight to end dirty pensions, and what you can do to help.
How did this whole thing start?
Firstly, we saw growing consumer and citizen engagement around the individual steps people can and are taking to improve their sustainability and cut their carbon footprint. That’s things from the clothes people wear, to the food they eat, to how they travel, to the brands they buy from. More people are thinking about these choices.
But there is a real disconnect between those proactive decisions and the impacts of our money, which oftentimes, without us knowing, are actively contradicting or undermining those positive choices.
That means there are people in the UK who are becoming vegetarians, or vegans, but who are through their pensions, or their bank accounts, invested in the meat industry. There are peace campaigners who are protesting against wars around the world, but who will find themselves invested in the weapons manufacturers. And you've got Extinction Rebellion protesters who are campaigning against some of the biggest polluting companies in the world, but again they may well be funding them directly through their pensions.
And so we saw these accidental contradictions between our lifestyle decisions and our money. And we thought there was something really powerful we could do around that.
Why don’t we know where our money is going?
Partly it’s because we've got pretty low levels of financial literacy in the UK. Understanding about our finances, and about money and about banking, checking and savings, and pensions and stuff is at a pretty basic level. There is a lack of awareness about money, how it works, what it does, and where it goes.
And then I think you layer onto that the fact that pensions are particularly opaque, confusing, and complicated. How pensions communicate to their members about where the money's going and the impact it's having is pretty poor. The transparency within the industry is very limited in terms of showing you the practical impact of your money.
And then it’s the fact that pensions are all about the future, right? They're about saving for 50 years down the line. And people aren’t very good at thinking about the future — they're focused on the here and now, which is completely understandable.
Our campaign tries to address some of that and tries to demystify pensions and make them less of a scary, static, thing about money being saved in a bank vault somewhere. Instead we want people to think about it as your hidden superpower right now to influence the world around you and help build a better world for the future.
The financial system is incredibly complicated and at times deliberately so, to exclude everyday people from engaging with it. So people wash their hands of it because it's so hard to engage with.
So how do I 'green' my pension?
I think the first thing to be doing is contacting your pension provider and asking, “where's my money invested? And what kind of impact is it having on the world around us?”
If the pension fund cannot give you those answers about whether your money is having a positive or negative impact on the world — then I think there's a problem there straight away. You can then start looking at advocating for change with your pension provider: calling on them to take steps to cut their carbon emissions, and to improve the way they engage with social issues as well.
We’ve got letter templates on our website that will help you contact your fund directly and ask them to take this kind of action. If you feel like they're not taking steps or the answers you get aren't good enough, then you can start thinking about whether there's a different pension fund out there which is more aligned to your values. There are different funds that you can select based on different criteria, based on what really matters to you.
It’s your money. And for most people in the UK, it will be the biggest pot of savings that they have. We don't tend to consider it as savings, or as an investment — we consider it a pension, which is something scary and distant and long term. But actually, it's a big pot of money, which you own and you should have the right to say where it’s going.
But is a green pension going to be worth as much?
The evidence shows that in the past five to 10 years, more sustainable funds or ethical funds have matched or outperformed the standard market over that time.
There’s an increasing body of evidence which shows that it doesn't have to be morals versus money. NEST, for example, the biggest UK pension fund by number of members, has an ethical fund, and they have released their results showing it was their second highest performing fund over the past five years, ahead of their default fund.
It is a practical question as well: where do you want your money invested long term? Do you think it's a good bet to be invested in some of the businesses which frankly, can't exist in the next 20 years? Looking at the way legislation and consumer pressure's going we think investing in more sustainable options is a solid long term investment strategy.
What should pension providers, and the financial system broadly, be doing about this?
Firstly they need to be much more transparent about where the money is being invested, and having the evidence available on what kind of impact it is having on the world, positive or negative.
Secondly, it’s about creating more sustainable funds for members so there's more choice for individuals who are increasingly waking up to the power of their money and wanting it to align with their values.
It’s also about them making sure default funds where most people will end up putting their pension are invested sustainably. We should not have to rely on people having to switch to a better fund, it's about making sure that the £2.7 trillion currently in UK pensions is invested more sustainably.
We're not a switching campaign, we want people to have choice and a voice over where their money goes, and if people do want to switch, that's great. But ultimately, I think if you want to have a real impact at scale you need to be shifting the whole system rather than trying to get people one-by-one to move their pensions.
What action can I take now?
We’ve got different actions on our website. We focus on getting providers to make net zero and climate targets and giving people the option to contact their provider about that.
We also have a new petition calling on the pensions industry to cut deforestation from its investments, and a new report which shows that there is quite a significant link between our pensions and global deforestation.
You can take action with Global Citizen and Make My Money Matter by signing a petition here calling on UK pension funds to stop funding the climate crisis, and you can also take action by emailing your pension provider with the template here.