Majority of UK pension firms have ‘inadequate’ climate plans

The Climate Action Report – developed by sustainability research provider Profundo in partnership with green pensions campaign Make My Money Matter – has found that most of the UK’s major pension providers are failing on climate action.

Published on Wednesday (21 February), the report assessed and ranked the public climate strategies of the UK’s 20 largest workplace providers. Collectively, these firms account for more than £500bn in assets, and have more than 15 million active members.

Ranked on commitments to 1.5C pathways, disclosure of carbon emissions, target-setting investment plans, nature and fossil fuel phase-outs, not one provider was deemed to be taking a leadership role in climate action.

This lack of action has sparked concerns that pension providers are funneling investments into initiatives that fail to respond to the climate crisis, putting billions of pounds at risk.

Make My Money Matter’s co-founder Richard Curtis said: “Climate leadership is not just important for the planet – it’s popular too. But the fact that 17  of the UK’s top 20 providers have inadequate or poor climate plans tells you all you need to know about how seriously the industry is taking this issue.

“The public will rightly be worried about these results, and we hope this ranking acts as an urgent wake up call for the pensions industry to up its game on climate change. In doing so they can help protect the planet and provide savers with pensions they can be proud of.”

UK-based pension schemes have more than £88bn invested in fossil fuel firms, the equivalent of £3,000 per pension policyholder.

Of the 20 leading providers examined in the latest report, only Aviva, Legal & General and Nest were found to have ‘adequate’ plans in place. In total, 13 providers, including Royal London, Prudential and Standard Life – have plans deemed inadequate. Mercer, Hargreaves Lansdown, The People’s Pension and SEI, who manage the pensions of more than two million savers collectively, were named as the worst four performing organisations.

Ongoing trend

Last year, research from the Economics of Energy Innovation and System Transition (EEIST) project, led by the University of Exeter, found that current net-zero transition models used by pension funds assume that existing climate-related trends will continue gradually, but fail to account for various “tipping points” that could trigger severe climate and ecological breakdown.

Tipping points could also deliver positive disruptions, such as the rapid development of new green markets. Nonetheless, pension funds are failing to examine many of the risks and opportunities of the net-zero transition.

Additionally, research from Carbon Tracker found that widespread reliance on “flawed research” means that investment decisions today are ignoring the economic and physical effects of a changing climate. As a result, pension funds are risking the retirement savings of millions of people.