UK pension funds still holding £88bn in fossil fuels, despite increased climate commitments

That is according to Make My Money Matter, which has analysed the fossil fuel investments of more than 50 of the nation’s largest pension schemes.

Most of these schemes have net-zero targets but are yet to completely stop investing in fossil fuels. While some fossil fuels are likely to be used in a net-zero world, Net-Zero Tracker recently confirmed that no major oil and gas firms are properly preparing to decrease production in line with levels recommended by climate scientists.

More than half of the pension schemes assessed by Make my Money Matter have both Shell and BP within their top holdings. Shell rolled back its targets to decrease fossil fuel production earlier this month, with new chief executive Wael Sawan positioning the decision as necessary to deliver value to shareholders.

Earlier this year, BP stated that it is no longer likely to meet a previous pledge to reduce oil and gas production by 40% by 2030 against a 2020 baseline. BP argued that near-term demand for oil and gas is higher than it previously expected and stated that additional fossil fuel earnings can “support investment” in the energy transition.

Make My Money Matter is calling on pension funds – especially those with net-zero targets – to put fossil fuel firms “on notice”. They should be told to set out plans to end new expansion and set credible emissions goals within a set timeframe. Failure to deliver should result in divestment.

Make My Money Matter’s co-founder Richard Curtis said pensions should accept “no more nice words of vague statements” from the fossil fuel sector.

The campaign is highlighting how failure to engage with high-carbon sectors can build up reputational risk for pension funds. It is pointing to the financial risks associated with fossil fuel firms as the global economy decarbonises, which could erode policyholder trust. Moreover, it is highlighting how most pension holders are keen to see their investments being used in ways that benefit the environment.

Who’s managing your future?

In related news, a new analysis of the fossil fuel policies of 30 major asset managers has found that most are still investing in major oil and gas expanders. Five of these firms are US-based and the other 25 are headquartered in Europe.

Collectively, the report states, these 30 asset managers have invested at least $3.5bn in companies actively involved in fossil fuel expansion. Two-thirds of the asset managers had invested in either BP, ConocoPhillips, Eni, China National Petroleum Corp or Indonesia PT.

Vanguard is named as the largest single investor, holding at least $1.2bn in bonds recently issued by 19 major fossil fuel developers. Allianz and BPCE are named as the largest investors in Europe.

These investments were allowed to happen partly due to poor governance. Ten of the 30 firms have no coal sector policy, and 18 of the 30 have no sector policy for oil and gas.

“Asset managers have enormous power through their bond purchases and it’s time to ask them to flex their muscles and stop this flow of money to fossil fuel developers,” said Reclaim Finance’s sustainable investment campaigner Lara Cuvelier.

“We need to pay more attention to the bond market when we think about how oil companies like BP and TotalEnergies raise capital for their devastating climate projects. There is a lack of transparency in these markets but it is crucial to shed light on this hidden support.

“It is time for asset managers’ clients to challenge them on this issue and ask them to put in place robust policies to stop this scourge.”

Also contributing to the report alongside Reclaim Finance are ReCommon, Sierra Club, Urgewald and The Sunrise Project.