Business leaders unaware of climate impacts of pension schemes

Under the proposals, administering authorities would be required to calculate and act on the carbon footprints of their assets and funds

That is the key warning from the Make My Money Matter campaign, which is calling on businesses to examine the potential climate impacts of their pension schemes.

Make My Money Matter  – the organisation set up by Comic Relief co-founder Richard Curtis in a bid to press all UK pension funds to align with climate science – has previously published research on the contribution of pensions to an individual’s carbon footprint.

Compiled in partnership with Aviva and Route2, the research claims that the average UK adult can reduce their annual carbon footprint by 19 tonnes by shifting to a “greener” pension. This reduction is 21 times higher than the reduction that could be achieved by going vegetarian, taking no flights and switching to renewable electricity in the home.

The organisations also found that the investments of UK pension schemes have enabled an estimated 330m tonnes of carbon annually, which is higher than the UK’s total annual output.

However, new research claims that just 44% of UK chief executives are aware of these impacts, while just eight of the FTSE100 firms have mentioned pension schemes as part of ongoing sustainability strategies.

Commenting on the research, Richard Curtis, Co-Founder at Make My Money Matter said: “Businesses have rallied to become more sustainable over recent years, however, many are failing to use one of the most powerful tools at their disposal – their company pensions. With £20bn invested each year through these company schemes, the potential of this money is extraordinary.

“Make My Money Matter wants all businesses to harness the hidden superpower of their pensions and align their company schemes with their corporate sustainability plans. That way, they can put their money where their mouths are on sustainability, while ensuring their pensions are building a world their employees actually want to retire in.”

Last year, the chairs of 14 corporate pension funds including Tesco, Unilever, BT and Pennon made a joint commitment to halve portfolio emissions by 2030 and bring them to net-zero by 2050.

Signatories of the commitment, led by the Prince of Wales’ Accounting for Sustainability (A4S) initiative, collectively manage almost £268bn in assets.

However, Make My Money Matter has released research concluding that 71% of the UK’s largest pension schemes do not yet have credible plans for reaching net-zero – a proportion representing more than £2trn.

Change is coming in the form of legislation.

The Department for Work and Pensions (DWP) has confirmed this month that it will introduce new requirements for UK pension schemes to assess whether their investments are aligned with the Paris Agreement on climate from this October.

In documents published on 17 June following a consultation on measures to improve climate reporting by pension schemes, the DWP confirmed that pension schemes will be required by legal mandate to measure and disclose how their investments are aligned with – or misaligned with – the Paris Agreement’s 1.5C temperature pathway. Reporting must be made available publicly and trustees must pledge that the reported information is accurate and detailed as they are able to gather.

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