Investments of UK pension schemes enable the release of 330m tonnes of carbon every year according to new research by campaign group Make My Money Matter and sustainability research house Route 2. This output exceeds the UK’s entire annual CO2 emissions and would require half of the UK’s landmass to offset. 

The new research aims to raise awareness and encourage government and industry action by quantifying the carbon emissions associated with UK pensions

Make My Money Matter has previously called on the government to make net zero mandatory for pension funds at COP26 to drive urgent emissions reductions. 

“With pensions enabling emissions which exceed the UK’s entire CO2 output, the message couldn’t be clearer: the time for green pensions is now,” said co-founder of MMMM, Richard Curtis. 

Trillions of pounds are invested by our banks and pension funds which will determine what kind of world we live in. With £2.7tn in assets under management, the UK’s pensions industry plays a significant part in setting the pace of decarbonisation. 

According to the report from MMMM, 70% of leading pension schemes have failed to set robust net zero targets despite scientific evidence and growing public pressure. This means that almost £2tn invested in schemes is yet to be aligned with the Paris Climate Agreement. MMMM say this is due to absence of data and poor transparency across the industry. 

The findings reveal that the nation’s retirement savings are contributing to the climate crisis even more than previously thought, and highlight the critical role of pensions in meeting the UK’s net zero targets.

Pension schemes are estimated to invest £112bn into fossil fuels, which is the equivalent of £60 for every £1,000 invested. 

“If we fail to lower the emissions of our pensions, we will fail to prevent the worst effects of catastrophic climate change; jeopardising the very futures our pensions should be saving for,” said Curtis.

While many have begun to take climate risk more seriously, with around £800bn of scheme assets now committed to robust net zero, MMMM said voluntary commitments are not going far enough. 

“While we’ve seen green shoots of progress with voluntary net zero commitments, £2 trillion remains in schemes which have failed to act, undermining the UK government’s own net zero targets,” said Curtis. “That's why we believe it’s time for the government to make net zero mandatory for all pension schemes, and make sure the trillions in our pensions helps tackle the climate crisis, not fuel the fire.”

MMMM has called on the government to introduce urgent legislation to make net zero mandatory for all pension schemes. In doing so, the aim is that the UK can dramatically reduce emissions, leading the world on green finance and protecting savers’ investments from the worst effects of climate change.

“Our analysis has shown that, because of the vast sums of money that they are responsible for, the levels of GHG emissions that they have influence over is significant. It also demonstrates that selecting pension schemes that are more climate sensitive is an effective tool in combatting climate change,” said founder of Route 2, Daniel Dias.

MMMM also questioned why a government that is prepared to set a legally binding target to cut national emissions to net zero, does not do the same for an industry which enables an even higher carbon output than that of the UK.