Can your pension pot tackle the climate crisis?

As part of the £2.6 trillion invested in pensions in the UK, is your pension pot the secret superpower that can tackle climate change?

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It’s hard to ignore the impact the human race is having on the environment. Extreme weather events all around the world mean environmental disasters are never far from the front pages. But could your pension help to solve the climate crisis?

With £2.6 trillion invested in UK pensions alone, it could well be that your pension is the secret superpower that could fight climate change. The rise of green pensions has shown that many UK investors are thinking along the same lines.

Here, I will break down what a green pension is, how to find out where your pension is invested and which providers are trying to make a difference.


What is a green pension?

A ‘green pension’ is one that looks to make a positive impact on the environment and contribute towards a more sustainable future.

A lot of us are accidental investors through our retirement savings. This means you may not fully understand the impact your pension pot could be having.

Adopting a green approach means you don’t invest in companies that are contributing to the climate crisis. So you avoid fossil fuel companies or businesses that have poor environmental practices. Instead, you invest in things like renewable energy, electric vehicles and reducing textile waste.

Where is your pension invested?

Do you know where your pension is invested?

Research by Cushon found that the average UK pension pot unwittingly finances an average of 23 tonnes of CO2 emissions every year through the businesses it’s invested in.

It can be all too easy to live in blissful ignorance when it comes to your pension. But the more informed you are, the more in control you can be. Most people have what is called a defined contribution pension scheme. This is where your fund is invested on your behalf by your pension company.

If you haven’t specified with your provider where you want to invest, your money will be placed in a ‘default’ fund. These funds often just follow an index like the FTSE 100.

Therefore, if you want to tackle climate change with your pension, you will need to specify the type of fund you want to invest in. Providers often offer ‘ethical’ or ‘fossil fuel free’ options.


Which providers are making a difference?

Pension schemes are changing. More and more are trying to tackle climate change and have more of an environmental, social and governance (ESG) focus.

The National Employment Savings Trust (NEST) – the UK’s biggest pension provider – has divested from fossil fuels this year. Instead, it has diverted £5.5 billion worth of investments towards ‘carbon aware’ companies.

Cushon has its own net-zero fund. And other online investment providers also have pensions that have a socially responsible focus. For example, Wealthsimple gives you the option to put your money into socially responsible initiatives that are weighted for ESG factors as well as performance.

And if your pension provider is yet to commit to net-zero emissions, then you can head over to Make My Money Matter and give them a nudge.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

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