1. What do pension funds have to do with climate change?
2. Why not just demand that the oil, gas and coal industries clean up their act directly – why focus on pension funds?
3. What do you mean by devastating climate change?
4. How can I find out what my pension provider is investing in?
5. Is my pension provider under any obligation to tell me what my money is invested in?
6. Can I move my pension into an ethical pension fund to make sure that my money won’t fund fossil fuels?
7. What are green investments?
8. Why aren’t pension funds doing anything about the risks of climate change?
9. I don’t have a pension but I want to get involved, what can I do?
When you put your money into a pension, it doesn’t just sit there. That money is invested in a whole range of options, including company shares, bonds, property, infrastructure etc. Our pension funds currently have around £3 trillion invested in them by us, and the decisions they make about where to put that money shapes the health and nature of our economy. If we want to protect our planet, we need to call on our pension funds to start making climate-aware decisions about how they invest our savings.
There are two reasons why we think using pension power to tackle climate change is the most effective method. Firstly, because money talks: our pension funds have around £3 trillion of savers’ money invested in them, and a significant portion of that money is invested in company shares. As shareholder owners, they have the power to demand greener, cleaner company behaviour. Targeting campaigning energy at the pensions community is tactic that works. Since its inception in 2005, ShareAction has used this method to challenge and improve corporate behaviour on a wide range of social and environmental issues, including the Living Wage, tar sands, and Arctic drilling.
Secondly, if we go directly to fossil fuel companies, we are only addressing one of the factors contributing to climate change. Instead, we need to take a holistic approach. This means addressing not only fossil fuel companies, but also encouraging green investments, demanding targeted climate action plans from our pension providers, and calling for government policies that enable the low carbon transition. There’s more to climate change than fossil fuel companies alone, and we think targeting pension providers will be the most effective method to catalyse systemic change.
Our world is heating up, and if it continues to do so, we will see devastating effects. There is considerable uncertainty about what a warmer world will be like, but scientists agree that it will include extreme weather events, sea level rise, and major impacts on food, agricultural, and water resources. In May 2013, we reached 400 parts per million of carbon dioxide in the atmosphere – considered by scientists as an important milestone on the path to a dangerously warmer world.
Some pension providers publish a list of their ‘equity holdings’ (the companies that they hold shares in) either online or in their annual report. These lists can vary from just their top 10 holdings to a comprehensive list. They may also publish records of how they’ve voted at companies’ Annual General Meetings (AGMs), where they get to re-elect the board of directors and approve pay packages among other issues. Pension providers don’t only invest in company shares. They also put our savings into other types of investments including bonds, property, infrastructure, and private equity. They may share some information about these other investments on their websites or in materials you receive from them.
If your pension provider doesn’t publish any of this information, you can contact them and ask them directly. If you’d like help to do this, please contact our Outreach Officer Jo Beardsmore at firstname.lastname@example.org.
Legally, it is not under any obligation to tell you what your money is invested in. However, some pension providers do make some or all of this information available. If your pension provider isn’t one of them, we think you have a right to ask for more information. If it continues to be reluctant to tell you where your money is going, we think it should be able to provide a robust reason why.
There is currently EU legislation that ensures that every saver who is taking an investment risk (i.e. anyone not in a final salary scheme) does have the right to access this information, and although this has not yet been implemented into UK law, it does mean that savers have ample grounds to push for meaningful answers to questions about where their money is going.
Realistically, it is fairly difficult to move your pension fund (although a small number of employers will allow it). However, most pension providers should offer an ethical investment option. This can ensure that your money isn’t invested in a variety of ‘unethical industries’ such as tobacco or arms. You may also be able to select options that either positively or negatively screen for climate change considerations. This means that they seek to invest in companies involved in positive climate-related industries (e.g. carbon offsetting, renewable energy, green infrastructure); or choose to screen out those with negative impacts on our climate (e.g. lots of greenhouse gas emissions).
However, moving your pension fund isn’t necessarily the best method for creating change. By keeping our money in mainstream funds, we keep the power to call for change. We need mainstream funds that aren’t specialist ethical/green funds to start considering their investment decisions in the light of climate change. We need it to become normal practice for our pension providers to increase the amount of money they put into green investments and for them to demand cleaner projects and strategies from fossil fuel companies.
Broadly, they’re the investments needed to create an efficient, clean, and prosperous low carbon economy. That includes all low carbon goods and services, as well as the processes and technological advances that will allow our energy and resources to be used more efficiently. The green investment landscape is very wide, spanning renewable energy, energy efficiency, transport, agriculture, water and waste management, and recycling. It’s a vital and growing sector, accounting for a third of the UK’s growth in 2011-12 according to the Confederation of British Industry.
Some already are. A number of global and UK pension funds have developed policies to manage the risks of climate change, and are turning these policies into action. Some best practice examples can be found where pension funds are: setting targets to reduce their exposure to carbon risks; engaging with carbon intensive companies to stimulate changes to business strategy; investing in climate solutions; getting rid of high carbon, risky investments; engaging with policymakers; and opting for stock-market indices that are designed to lower exposure to carbon risks while still maintaining returns.
However, many have yet to act. Climate change presents a new and uncertain risk to pension providers. They need to hear from us, their savers, that this issue matters to us and that we want action. To really achieve change at the scale we need, the investment practices listed above need to trickle down from the leaders into the entire mainstream pensions industry. Taking our e-actions is one way to demand action from your pension fund: you can email your pension provider here.
Every single pension saver has a stake in this new battle against climate change. If we come together and raise our voices loud enough, our pension funds will have to listen. And if they listen, we might just be the people who kickstarted the transition to a low carbon world.