A recent report by Make My Money Matter sheds light on the relationship between finance and environmental stewardship, revealing both the potential and the shortcomings of our pension investments.

The UK Pensions: Climate Action Report highlights the stark reality that while many of us contribute to pensions, few of us truly understand where our money goes and the consequences of it. Often, out of the £3 trillion that exists in UK pensions, this money is financing industries that perpetuate environmental degradation and exacerbate the climate crisis, including fossil fuel extraction to deforestation; our retirement savings are entangled in practices that are having a profound impact on the planet.

Despite growing awareness of climate issues, pension providers have been slow to act, and as figures currently stand, “£88 billion of UK pension savers’ money is invested in fossil fuels”. The report evaluates the climate policies and practices of the top 20 Defined Contribution (DC) pension providers in the UK, revealing a spectrum of commitment levels. While some providers demonstrate commendable efforts to address climate change, some lag far behind, doomed by inadequate strategies and insufficient action.

Key findings from the report highlight the urgent need for reform and the desperate need to move the UKs money away from industries “that are damaging the planet, destroying nature, and driving climate change”. The report exposes the staggering amount of total carbon emissions of our pensions which is approximately 330 million tonnes each year, with a further £300 billion of the UKs money invested in companies with a high risk of deforestation, perpetuating environmental harm on a global scale.

In response to these findings, the report issues a call for decisive action, advocating for “cleaner, greener businesses powering the transition to a more sustainable world”. It urges pension providers to set ambitious emission reduction targets, phase out investments in fossil fuels, and prioritise investments in renewable energy and climate solutions. Additionally, it calls for greater transparency and accountability in pension fund management, empowering savers to make informed choices about their investments.

The report does not stop at highlighting deficiencies; it also offers a roadmap for change, with the ambition to build “a movement to make money matter”. As the report encourages, by embracing bold initiatives and strengthening climate policies, pension providers can catalyse a transformative shift towards sustainable finance. Moreover, it calls on individuals to demand accountability from their pension providers and advocate for strategies that are “tackling deforestation and unlocking investments in climate solutions”.

The overall message is that by harnessing the power of finance, our pension providers must urgently step up on climate action and redirect trillions of pounds towards building a more resilient, equitable, and sustainable future all.

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