There is one big item that affects our carbon emissions but often gets overlooked, and that is our pensions.

In fact, research shows that making your pension ‘greener’ is 21 times more effective at cutting your carbon footprint than adopting a vegetarian diet, changing energy supplier and giving up flying combined!

According to the non-profit organisation, Make My Money Matter, £88 billion of UK pension savers’ money is invested in fossil fuel companies. Rather than funding damaging industries that belong in the past, our savings could instead be invested in the sectors and solutions supporting the transition to a low-carbon future.  

With nearly £3 trillion invested in pensions in the UK, with just a little effort from us, this money can do far more to tackle climate change and protect nature than we can do as individuals.

The money you pay into a pension is invested by the pension provider in companies listed on the Stock Exchange, benefiting particular companies and sectors. If you didn’t make any specific requests about how your contributions are invested, then your money will probably lie in your provider’s default fund. This is invested in a range of industries including ones which may not be environmentally sustainable.

There are now many ethical and sustainable pension options available. Both personal and workplace pension schemes usually offer a choice of funds with the same pension provider, such as an ethical fund that you can opt into.

In pension terminology, ESG (Environmental, Social and Governance) investing considers how a company impacts the environment and society, as well as how it is governed. It covers areas like climate change, biodiversity, human rights and plastics. Such funds can also screen out the most negative companies, so your money will not be invested in carbon-intensive companies or sectors.

If you have an online account with your pension provider, you may be able to view the choice of funds and change your fund online. If not, ask your employer or personal pension provider about moving your pension investment to a greener fund.

If your pension provider doesn’t offer a fund that matches your environmental values, Make My Money Matter has a tool on its website (makemymoneymatter.co.uk) that allows you to select your provider and send a pre-written letter asking it to offer some green pension options.

Make My Money Matter have also published a ‘Climate Action Report 2024’ that ranks UK pension providers on their climate performance – those ranking best on climate are Aviva, Legal & General, Nest, Cushion and Scottish Widows. You can check the scores of your own pension provider on the website.

Make My Money Matter calculate that our pensions have the potential to invest £1 trillion in climate solutions, like renewable energy or protecting forests, by 2035. This is half of all the money needed to reach the UK’s 2050 net zero goal. So let’s put our pensions to work creating the future that we would like to retire in.