UK pension schemes ‘have £88bn invested in fossil fuel firms’

An estimated £88 billion of pension savers’ money is invested in fossil fuels, or 10 per cent of their total stock and corporate bond holdings, green campaigners claim.

That equates to an average of around £3,000 per saver, despite both environmental damage and the financial risk of a ‘significant devaluation’ of these investments in the future, they say.

According to Make My Money Matter, pension plans continue to fund fossil fuel companies despite a slew of climate pledges and evidence that savers want them to forego such investments.

The campaign group, an initiative of renowned film director Richard Curtis and former Bank of England Governor Mark Carney, wants the UK’s pension pots to be used to tackle climate change.

The new report, conducted with sustainability research firm Route2, claims that most of the pension schemes they analyzed have both Shell and BP in their top 10.

Make My Money Matter believes investing in fossil fuels represents an ‘environmental and financial time bomb’ in retirement, warning that it carries risks for individual savers.

It says that in a rapid net-zero transition, fossil fuel investments are at risk of significant devaluation as business strategies will be threatened by climate disputes, plummeting demand, stranded assets and customer backlash.

The group adds that a nationally representative survey in March found that 48 per cent of Britain’s 1,300 pensioners would switch companies if they discovered their scheme was investing in fossil fuel companies developing new oil, gas and coal projects.

Other surveys have suggested that about half of employees want to invest their retirement savings to fight the climate crisis – or according to environmental, social and governance principles of ‘ESG’ – if their arrangement allows it.

But many are reluctant to step out of ‘standard’ working funds, placing the responsibility on providers to convert them into sustainable investments.

People in employment are automatically enrolled in their employer’s pension plan unless they actively object, and the vast majority stay with the default fund whether it really suits them or not.

MMMM calls on UK pension providers to:

– Notify fossil fuel companies that they are expected to rule out new oil and gas expansions and draw up credible 1.5 degrees aligned plans (meaning limiting global warming to no more than 1.5 degrees Celsius above the pre-industrial level)

– Vote against any company that continues to develop new oil and gas and does not have a credible 1.5 degree plan

– Public divestiture within set timeframes of fossil fuel companies that do not take action on these issues.

Richard Curtis, co-founder of Make My Money Matter, says: “If pension funds are serious about tackling climate change, they need to get serious about their investments in the fossil fuel industry.

This no longer means fancy words or vague statements, but instead a clear, unwavering message: rule out oil and gas expansion and set real climate targets or stand for divestment.

‘Because continuous, uncontrolled investments in the fossil fuel industry simply do not make sense. It is unpopular with the public, catastrophic for the planet and endangering the pensions of millions of British citizens.”

What does the pension industry say?

“The evidence is clear: the global transition to net-zero emissions will have a material impact on the performance of oil and gas companies,” said Katharina Lindmeier, senior responsible investment manager at pension provider Nest.

“It is not acceptable to kick the can into the street and do nothing.

“Investors should use their unique position to challenge companies if we don’t believe they are making wise long-term business decisions.”

Joe Dabrowski, deputy director of policy at the Pensions and Lifetime Savings Association industry group, said: “The pensions industry is playing a key role in helping the world meet its pledge to limit global temperature rise to 1.5 degrees.

“Many pension funds have already committed to achieving net zero and we expect more to do so in the near future.”

Dabrowski says the PLSA is committed to working with its members to help them achieve net-zero goals, including by pushing for policy change where necessary and encouraging industry-wide collaboration.

He continues: “As professional investors with a fiduciary duty to grow and protect their participants’ savings for the very long term, pension plans have a strong interest in ensuring that the companies they invest in are fully prepared for a lower carbon future. emissions.

“One of the main ways they can do that is by using their shareholder rights to hold corporate executives accountable for their climate strategies.

“Disinvestment is just one way they can express this view, but transferring ownership to another investor, who may be less scrupulous, has no positive effect on reducing carbon emissions.”

A spokesperson for the Association of British Insurers said: ‘The role of insurers in tackling climate change has never been greater or more important, and through our Climate Change Roadmap we have made significant progress in the transition to Net Zero.

The insurance and long-term savings sector is committed to fully decarbonising operations by 2050 and seeing a 50 percent reduction by 2030.

By working with the companies in which they invest, pension funds can use responsible influence mechanisms to ensure that they are also aligned with the long-term transition plan – which is an important part of it, in addition to transparent reporting.

‘There are more and more ‘green’ pension funds available to savers and we advise people to talk to their pension provider if they want to know more about the options they have.’