Pensions with intentions: a simple guide to sustainable investing

We know what you’re thinking: is there anything more boring than the guy at the party banging on about pensions? That’s why so many of us have never even bothered to check where the money in ours is invested (yep, our pensions are invested), let alone whether those investments are in line with our values.

But the sad fact is, if your money is in a standard, default pension, it’s likely to be doing more harm than good.

Billions of pounds of our pensions are invested in carbon-intensive sectors, such as fossil fuels and fast fashion, or unethical industries such as tobacco, arms and gambling.

But the truth is that our pensions are powerful.

In fact, having a sustainable pension is one of the most powerful things we can do to protect the planet. Research by Make My Money Matter, Aviva and Route2 found that greening your pension is 21 times more effective in cutting your carbon than giving up flying, becoming vegetarian and switching to a renewable energy provider combined.

So if you want a pension to be proud of – and for the £2.6tn invested in UK pensions to build a better world – read this helpful guide.

Why pensions matter
Many of us have sought ways to cut our carbon in recent years, from recycling to going vegan to cutting back on air travel. But so often, our money is undermining those actions. Through our pensions, we’ve become accidental investors in many of the practices we avoid and industries we fight against.

Pension providers have invested trillions in problematic sectors on our behalf without ever asking the critical question: are these investments building a world we actually want to retire into?

But it doesn’t have to be this way. This is your money, and you have the power to make sure it does better for the planet.

What good could your money do?
More sustainable investment funds open a range of opportunities for impact in the world, from clean energy, green transport and reforestation to human rights, education and healthcare. Your money could be funding the best businesses, not the worst, and helping build a world you actually want to retire in.

Will a sustainable pension lose me money?
Green pensions aren’t just good for the planet – they also allow us to take advantage of the enormous economic opportunities of a green industrial revolution. Sustainable industries are now among the fastest growing worldwide, and according to financial experts, sustainable investing represents the greatest investment opportunity of our generation. This is backed up by research from Morningstar, which found that sustainable and responsible funds matched or outperformed non-sustainable funds over the past 10 years.

Change is happening
People across the UK are increasingly demanding pensions to be proud of. In fact, 68% of UK savers want their investments to consider people and the planet alongside profit – and 44% of consumers would switch to a green pension if offered one by their provider.

Growing numbers of pension providers are beginning to respond to this demand, from industry giants including Aviva, Nest (the National Employment Savings Trust set up by the government), Scottish Widows and the BT pensions schemes, to new kids on the block such as Cushon and Smart Pension. All have set net zero carbon emissions targets, some have announced plans to stop investing in the highest polluting companies, and others are investing significant resources into climate solutions. One is net zero now.

“We recognise that many consumers now expect some level of sustainability to be built into whatever they buy,” says Rob Barker, Aviva’s UK managing director, UK savings and retirement. “That’s why the investment and pension assets controlled by us are included in our 2040 sustainability ambition.

“We’re also exploring new ways of giving our workplace pension members greater transparency over where their pensions are invested, while empowering them to play an active part in the engagement and voting approach to investing. By doing so, pension savers are being given collective power to influence some of the biggest organisations in the world into making more responsible decisions.”

What you can do to have a pension to be proud of

Find out where your cash is invested
If you don’t know how your pension is invested, call your provider and ask the question. If you don’t like the answer, ask what plans they have to achieve net zero, and what alternatives they have that are better for the planet.

If you belong to a company pension scheme, or are planning to join one, write to HR or your firm’s finance department to ask what the scheme’s investments are doing for the world and whether they will commit to net zero emissions.

The Make My Money Matter website has templates that can be copied and sent to both providers and employers.

Tell your provider to go green
If enough of us put pressure on our providers to go green, they’ll listen – after all, at a time when so many of us are demanding pensions align with our values, those that don’t will lose out on business. Make My Money Matter has a list of providers, and a message that can be sent to them with a couple of clicks calling for them to do better.

If you’re not happy, find a better option
If you are in a scheme, many providers will have more sustainable or ethical investment options available, meaning they can move your money with relative ease. If not, or if you don’t yet have a pension and want to find a sustainable private one, the Good With Money website has a list of the greenest pensions available. These include the PensionBee Fossil Fuel Free plan, which is the first mainstream private pension to completely exclude companies with reserves in oil, gas or coal, the Nest ethical fund, which invests in companies with fair labour practices and fair trade policies.

What’s the ultimate goal?
Make My Money Matter is calling for all pension funds to become “net zero heroes” by committing to net zero carbon emissions before 2050, with a halving of emissions in this decade. That way, everyone, everywhere can have a pension they can be proud of.

Your pension is powerful, and so are you. Tell your provider you want them to invest more sustainably here, and make sure your money is building a better world.