Only four major providers are committed to cutting deforestation from their investments – where currently UK schemes have at least £300bn invested in companies at risk of driving deforestation. Some progress from industry witnessed in specific areas, with over half of providers demonstrating initial emission reductions and 60% planning to increase their investments into climate solutions. At COP27, Make My Money Matter launches a new report holding
New research conducted by Make My Money Matter today reveals that the UK’s top 20 DC workplace pension providers are failing to keep pace with action required on climate change, despite the momentum generated at Glasgow COP26.
In-depth analysis undertaken in the lead up to COP27 by Make My Money Matter assessed pension providers’ progress against key areas of climate action.
Research uncovered that most of the top 20 schemes are lagging behind in multiple areas – from short term targets to action on deforestation. Over half (60%) of providers have not published the necessary 2025 emissions reduction targets to deliver front loaded action on climate and keep pace with the speed required.
Just four of the top 20 providers have made commitments on eliminating deforestation from their portfolios. With deforestation now the world’s third worst carbon emitter behind the US and China – and over £300bn of UK pension investments in companies at risk of driving deforestation - schemes cannot adequately act on climate without addressing their portfolios’ exposure to the practice
Many leading schemes say that they engage with their portfolio companies and asset managers to drive their transition to net zero, yet only ten providers have explicit climate voting policies which expect companies to align with global temperature goals. Not a single scheme has a policy to end fossil fuel expansion – integral to reaching net zero – undermining claims that they are working as effective stewards and contradicting guidance from the International Energy Agency that we do not need any new oil and gas developments.
While 60% of the top 20 providers do have plans to increase their investments into climate solutions, they are not yet at the level of ambition needed to significantly scale up industries that offer us a way out of the climate crisis – such as renewable energy and green infrastructure.
This analysis shows that the UK pensions industry is lagging behind on key indicators identified as crucial for addressing the climate emergency. While Make My Money Matter recognises the efforts of schemes that are reducing portfolio emissions and increasing investments into climate solutions, this is not enough, and more urgent, accelerated and ambitious action is now required.
At COP27, Make My Money Matter calls on all UK pension schemes to address five key failings:
• Set short-term 2025 emissions reductions targets to ensure urgent net zero delivery.
• Commit to eliminating deforestation from portfolios.
• Set clear climate voting policies that expect companies to align with temperature goals.
• Set policies to end fossil fuel expansion.
• Turbocharge investment into climate solutions.
Make My Money Matter analysed data from the following schemes:
· Aegon
· Aon
· Aviva
· Cushon
· Fidelity
· Hargreaves Lansdown
· Legal & General
· LifeSight
· Mercer
· National Pension Trust
· Nest
· NOW: Pensions
· Prudential
· Royal London
· Scottish Widows
· SEI
· Smart Pension
· Standard Life
· The People’s Pension
· TPT Retirement Solutions
Commenting on the analysis, Richard Curtis, Co-Founder at Make My Money Matter said: “Now is the time for action on climate - words are not enough. Since 2020 pension providers have committed £1.3 trillion to net zero, and this is important progress: but now the time has come for them to move beyond targets and take real action for real world impact.
That real progress is already falling dangerously behind. We hope this report highlights the clear gaps in the climate action of UK pension schemes and urges them to refocus for 2023; directing their immense power and potential to address the twin challenges of climate change and biodiversity loss.
We need pensions with purpose - we need to make our money matter in building a better world. By putting the £3 trillion in UK pensions to work in service of the planet, and pivoting from climate commitments to real action, the pensions industry can maintain the momentum generated over the past 12 months, and make sure our money is building a world fit for our retirement. There is no point inheriting a pension in a world on fire”
Tony Burdon, CEO at Make My Money Matter commented: “12 months on from COP26 in Glasgow, climate action from the UK pensions industry remains insufficient and fragmented.
“We hope this report acts as an urgent wake up call to the pensions industry – highlighting the absence of clear, co-ordinated and consistent climate action to date – while showcasing the critical steps that must be taken to get back on track.
“By putting a laser focus on short term targets to reduce emissions, improved stewardship, eliminating deforestation increasing investments in climate solutions and stopping the financing of fossil fuel expansion, the UK pensions industry can become world leaders in climate action, helping protect the planet, and secure long-term profits for their members.”
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