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Why pensions?

What are green pensions?

The typical UK pension fund has up to 1/3 of its investments in companies that harm people and the planet (research from The Path).

A green or ethical pension does the opposite, excluding fossil fuel, weapons, tobacco and other bad actors; instead investing heavily in companies that are aligned with the Paris Agreement’s vision for a greener future.

New research from Make My Money Matter, Aviva and Route2 estimates green pensions are nearly 57 times more effective at cutting emissions than adopting a vegan diet.

Why are they the best way to make an impact?

With mass flooding, extreme forest fires and record breaking temperatures headlining our news sources, it is hard to ignore that climate change is rapidly damaging our planet. And as the sun set on COP26 one theme became very clear - we cannot implement the global net zero targets our politicians and corporations are stating without sustainable finance solutions.

So you might be wondering, how on earth (pun-intended) can you make an actual difference Enter green pensions.

According to research conducted by Aviva, Route2 and Make my Money Matter, Richard Curtis’s campaign to move UK retirement savings into sustainable funds, with a green pension you can cut your carbon footprint 21 times more than going vegetarian, giving up flying and switching energy providers. Likewise, research conducted by The Path, a firm specializing in positive impact investing indicates that “moving a £100,000 pension pot with a traditional portfolio with oil and gas companies to a positive impact portfolio is the equivalent of taking five or six cars off the road a year”.

So why is a green pension relatively such a great way to make a difference?

Most people have a pension, or can create one.

Whether it is through your work or contributing your own savings, every UK adult has the opportunity to grow a pot of capital for retirement. By switching to a green pension you can put money that you already have into investments you care about without making significant changes to your day-to-day life.

With £3.564 trillion pension assets in 2020, the UK is the third largest pension market in the world. If every individual switched to a green pension just think about the potential collective power we can have by investing in solutions that can save our planet.

Pensions are long-term investments with significant tax relief.

There is unfortunately not an overnight solution for reaching a carbon neutral world. Net zero solutions will take time and require long-term investments.

Compared with other types of investments, which you may need to draw on more frequently to meet current financial needs, pensions are typically long-term saving pots that are left alone until retirement. The very nature of this means that this pot of capital aligns well with carbon solutions that require investment over a long period of time.

ESG investing is growing and here to stay.

The financial world has woken up to the importance of going green. Not only are investment opportunities in environmental solutions being identified, but climate itself is being priced into markets as a risk. Regulation is also encouraging investment firms and asset owners to consider the carbon footprint of their assets at an accelerating pace.

This has created opportunities in the market for many new ‘green’ products. Now you have more opportunity to select investments that meet matters you care about. And you are able to reach much further through your investments than making changes in your local community alone - you can have an indirect impact on companies and countries worldwide.

As the ESG product landscape develops, and as data becomes more available and accurate we will also have greater transparency into the impact our investments are having and how well different funds rank on a green scale. This will allow us each to track the value of our impact more closely and also be able to make better informed future investment decisions.

Sounds like a no-brainer, so why not switch?


Would like to contribute to our blog? Get in touch at benjamin@biomeinvest.com

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