Pension funds urged to help UK reach net zero climate goals

Campaigners say many investments still high carbon and call on firms to sign green pensions charter

Pension funds must set a target of net zero emissions for their investments if the UK is to meet its climate goals, influential figures in climate activism have urged.

Many people are unaware of whether their pensions funds are invested in fossil fuels or high-carbon activities, and even companies that have publicly committed to reaching net zero emissions may have pension fund investments that are still wedded to high-carbon businesses.

As the UK prepares to host the UN climate talks Cop26 in Glasgow this November, several prominent climate campaigners have written to the Guardian to urge pensions companies to sign up to green investment principles. The signatories are: Christiana Figueres, the former UN climate chief who oversaw the Paris agreement; Nigel Topping, the UK government’s business champion for Cop26; Richard Curtis, the film-maker and co-founder of the campaign group Make My Money Matter; and Amanda Mackenzie, chief executive of the charity Business in the Community.

“[Cop26] is a unique opportunity for Britain to showcase how our financial system can be leveraged to tackle climate change on the global stage,” they wrote. “To achieve this, we must all commit to making our money matter, starting with our pensions.”

While an increasing number of companies are aligning their business activities with the UK’s target of reaching net zero emissions by 2050, pension investments are lagging behind. “Why is it that a company working hard to achieve net zero in their operations continues to invest millions into a pension which does the opposite?” the signatories asked.

They urged all companies to sign up to the green pensions charter, which requires businesses to ensure their company pension scheme achieves net zero emissions by 2050, as well as setting short-term targets to halve the greenhouse gas emissions associated with their portfolios by 2030.

Emissions targets for the next decade are crucial to ensure that the goals of the Paris agreement, of holding global temperature rises well below 2C above pre-industrial levels, with an aspiration to limit rises to 1.5C, can be met.

Some big pension funds have already committed to the green pensions charter principles, including Scottish Widows, Aviva, Nest, the BT pension scheme, and some local government pension schemes. About £400bn is now invested in 15 schemes that are aligned with the net zero and 2030 targets.

The UK pensions sector accounts for about £2.6tn in funds, so any shift towards investing in lower-carbon portfolios would have a strong effect in investment and business.

The signatories wrote: “If we want to deliver healthy returns for our retirements, as well as ensure a healthy world for our grandchildren, 2021 needs to be the year that we unleash the power of our pensions … What’s the point in saving for retirement in a world on fire?”

Individuals can write to their pension scheme managers to ask whether their investment portfolios are exposed to climate risk, and shareholders can vote at company annual general meetings. Pension fund investors can wield substantial influence over the companies whose shares they hold, and their long-term outlook means that the risks of the climate crisis are having an increasing impact on their projections.

The UK government is considering strengthening financial disclosure requirements on publicly listed companies, that would require them to assess and publish details of the risks they face from climate breakdown.

Finance and business will be key to success at Cop26, and Topping is leading a Race to Zero, by which companies commit to a mid-century net zero target and emissions limits for the next decade.

Mark Carney, the former governor of the Bank of England and a UN climate envoy, recently announced a new initiative called the Glasgow Financial Alliance for Net Zero, under which banks and financial institutions, including Barclays, HSBC and the insurer Axa, have signed up to similar commitments.


Fiona Harvey Environment correspondent

The GuardianTramp

Related Content

Article image
Stephen Fry joins celebrities urging people to switch to green pensions
Actors, politicians and firms lend support to 21x Club’s call to pull investments out of industries that harm planet

Rupert Jones

04, Nov, 2021 @11:30 AM

Article image
Major UK pension funds worth nearly £900bn commit to net zero
Church of England, Lloyds and the National Grid among those pledging to meet 2050 target

Jasper Jolly

10, Mar, 2021 @6:00 AM

Article image
UK companies must commit to green pensions | Letter
Letter: Money invested in pensions should support a clean, sustainable transition to a net zero world, write Christiana Figueres, Nigel Topping, Richard Curtis and Amanda Mackenzie


05, May, 2021 @5:00 AM

Article image
Boost for fossil fuel divestment as UK eases pension rules
Exclusive: pension schemes will be free to dump fossil fuel investments after government drops ‘best returns’ legal rules

Patrick Collinson

18, Dec, 2017 @6:01 AM

Article image
Half world’s fossil fuel assets could become worthless by 2036 in net zero transition
$11tn fossil fuel asset crash could cause 2008-style financial crisis, warns new study

Jonathan Watts, Ashley Kirk, Niamh McIntyre, Pablo Gutiérrez and Niko Kommenda

04, Nov, 2021 @4:00 PM

Article image
Global alliance for phasing out coal not fit for purpose, says NGO
Powering Past Coal Alliance accused of failing to follow up on pledges as many countries expand use of coal

Fiona Harvey Environment correspondent

27, Apr, 2021 @8:53 AM

Article image
John Kerry: world leaders must step up to avoid worst impacts of climate crisis
US envoy uses landmark speech in London to make impassioned plea for unified global effort

Fiona Harvey Environment correspondent

20, Jul, 2021 @2:00 PM

Article image
Shipping firms vow to cut emissions if governments support low-carbon tech
Industry calls for levy to fund new technologies – but environmentalists say proposal blocks climate progress

Fiona Harvey Environment correspondent

05, Oct, 2021 @11:00 AM

Article image
Believe the hype – budget 2020 is very important
Chancellor Rishi Sunak needs to satisfy competing audiences, but there is a way he can do it

Larry Elliott

23, Feb, 2020 @10:47 AM

Article image
Leading finance firms sign up to Mark Carney forum on low-carbon investment
Barclays, HSBC and Axa among 160 firms in global alliance to hasten transition to net zero economies

Fiona Harvey Environment correspondent

21, Apr, 2021 @4:01 AM