Why We Need to Start Taking Control of Our Pensions

Words by Angus Chambers

Until very recently, I knew Richard Curtis solely as the writer/director of the beloved rom-coms Love Actually, Notting Hill, Four Weddings and a Funeral and About Time. However, Curtis has been doing brilliant work in an entirely different sector. He is the co-founder of the campaign group ‘Make My Money Matter.’ The campaign is “fighting for a world where we know where our pension money goes, and where we can demand it’s invested to build a better future”. Curtis has tapped into an interesting issue here, which highlights one of the most effective ways we can reduce our personal carbon footprint, as well as a method that corporations can drive significant change.  

The Problem

The problem that Curtis and many others are trying to tackle is that a lot of people have no real idea where their pensions are going. £2.6 trillion is in UK pensions, and 68% of people in the UK want their investments to consider people and planet alongside profit. Despite this, pensions are being poured into damaging industries like tobacco, weapons and fossil fuels. In the UK, at least £14 billion of the Local Government Pension Funds (LGPF) is invested in fossil fuel companies. When signing up to a pension scheme or joining a new company, this process is often done automatically, with many unwittingly supporting industries they would condemn, and go against their values. ‘Make My Money Matter’, and other organisations like ‘Clim8’ look to encourage people and investors to take responsibility and autonomy over their pensions, and redirect them towards companies or funds that align more with their interests. 

Taking Responsibility

The extent to which individuals take responsibility for reducing their carbon footprint, and for acting to combat climate change is quite varied. Some people, like me, are unwilling to make drastic changes to their lifestyle, while others may become vegan or only buy second-hand clothes, for example. While I have no problem with and encourage those who take more lifestyle-focused approaches to reduce their environmental impact, I think it is important to point out that taking control of pensions can be 21x more effective than “giving up flying, going veggie and switching energy provider combined”. Investing in greener companies can be more impactful in reducing our carbon footprint than other common methods, such as veganism, using public transport or using an electric vehicle.  While lifestyle changes may not be appealing to us for a number of valid reasons, there are other avenues available, and taking ownership of our pensions is a great way to make an even more substantial difference with quite limited effort. Clim8, for example, make this process simple, with clear themes such as green energy, sustainable food and climate technology. Their investment team will tailor your portfolio based on your personal risk profile, ranging from cautious to adventurous, with all approaches demonstrating growth over the past 18 months.  There is also evidence suggesting that when removing fossil fuels from your investment portfolio, you will earn higher returns. MSCI found that since 2010, those divesting from fossil fuels would have made an average return of 13%, rather than 11.8%. This is partly why advocating for greening our pensions is so important. 

Furthermore, divestment from corporations causing harm to society and the environment is one of the most effective ways to put pressure on them. Holding the worst offenders and most powerful people and entities to account is essential, and a shared goal for so many of us. Moving our money away from them can be the necessary action for them to reconsider their impact and approach. It does not seem like a coincidence that this method receives less media attention than those involving more dramatic personal action. The corporations who would be defunded are the most powerful and influential and would seek to bury movements that would cause them harm. Spreading the word around organisations like ‘Make My Money Matter’ and ‘Clim8’ is so important. 

The Rise of Socially Responsible Investment

Despite the importance of divesting from harmful corporations, there are signs of change and progress in the corporate sector. Recently, investment banks have looked to facilitate investment in more socially responsible projects and companies.  For example, Standard Chartered have recently pledged to ensure that their portfolio will be net-zero by 2050, and all new investments will have to commit to this goal. Additionally, there are now consultancies that specialise in guiding asset managers towards more responsible investments, and companies that are following prominent sustainability guidelines and frameworks, such as the GRI and SASB. GRI refers to the Global Reporting Initiative, and is a universal metric used by businesses and governments to report on their impacts and progress. SASB stands for Sustainability Accounting Standards Board does something similar, working to establish standards for disclosure on ESG topics. Similarly, some consultancy firms, such as Redington are focusing on green pension schemes. According to PwC, the integration of ESG related issues like Sustainability and Human Rights into company strategy and philosophy is now a “mainstream concern among investors, with 79% of respondents reporting that a company’s management of ESG risks and opportunities is an important factor in investment decision making”. The changing demands of shareholders, as well as the onsetting realisation that if corporations do not act now, they will likely be in financial trouble eventually has inspired some shifting priorities, even if they’ve been limited.

These changing priorities and courses of action come in stark contrast to the relative inaction from governments, and the disappointing inefficiency of COP26. Governments appear too busy trying to get re-elected to implement actual long-lasting policies, as evidenced by factions of the current Conservative government opposing Net Zero. 

With governments failing to take action, and corporations slowly beginning to make change, the people have the ability to put them under pressure. By taking control of our pensions and redirecting them in a way aligning with our interests and values, we can significantly reduce our carbon footprint.