Data point: is your pension funding the climate crisis?

Our pensions have the power to determine what kind of world we live in; at the end of 2020, assets in retirement saving plans globally exceeded US$53trn. But where does the money go? 

In the UK, the majority of pension schemes have failed to set robust net zero commitments, according to campaign group Make My Money Matter. The pensions industry is so embroiled in enabling carbon emissions that, if it were a country, it would find itself in the top 20 emitters globally. Research commissioned for the campaign found that UK pension schemes invest approximately £112bn (US$146bn) in fossil fuels annually.

It matters where our money goes—so much so that making your pension “green” could be the most effective action you can take to reduce your carbon footprint. The Make My Money Matter campaign suggests that greening your pension is 21 times more powerful than giving up flying, giving up meat and switching your energy provider—everyday actions that are often pointed to when talking about lower personal carbon footprints.

By switching to a sustainable scheme, the average UK pension of £30,000 (US$40,148) could save 19 tonnes of carbon a year, while the average UK pension of £100,000 (US$133,841) could save up to 64 tonnes of carbon a year. That is nine years’ worth of the average UK citizen’s carbon footprint.

Research by data analytics company Route2 and pensions provider Aviva suggests that the UK average individual annual carbon footprint is equal to 7.02 tonnes. Their conclusions were based on estimates of GHG emissions per £1 invested in a broad global equity index fund, and the estimated GHG emissions per £1 invested in an Aviva sustainable pension fund. After comparing those, researchers found the carbon savings were 0.64kg per £1 invested. 

According to Richard Curtis, director and co-founder of the Make My Money Matter campaign, “These findings confirm just how important our money is in the fight against climate change … In fact, our pensions are the most powerful weapon we have to help protect the planet.”