New research conducted by Make My Money Matter published today revealed that the UK’s top 20 defined contribution (DC) workplace pension providers are failing to keep pace with action required on climate change, despite the momentum generated at Glasgow COP26 last year.
In-depth analysis undertaken in the lead up to COP27, which is taking place this week and next in Sharm El-Sheikh, Egypt, Make My Money Matter assessed pension providers’ progress against key areas of climate action.
The research uncovered that most of the top 20 UK DC 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.
Additionally, it found that just four of the top 20 DC 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, the firm said.
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.
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 £1.3trn 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.”
He added: ”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.”
Many leading schemes say they engage with their portfolio companies and asset managers to drive their transition to net zero, yet only 10 providers have explicit climate voting policies which expect companies to align with global temperature goals, the research has found.
“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,” the firm stated.
“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,” it added.
The analysis showed 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.
“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,” said Tony Burdon, Make My Money Matter’s chief executive officer.
Make My Money Matter analysed data from the following schemes:
Legal & General
National Pension Trust
The People’s Pension
TPT Retirement Solutions