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Switching to a green pension

Green Pensions Report reveals that greening pensions reduces carbon footprint more than stopping flying
Katie Hill - Editor-in-Chief, My Green Pod
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Scottish Widows’ latest Green Pensions Report has found that while most Brits are well aware of how to reduce their carbon footprint through changing their behaviours, two-thirds (67%) of those surveyed don’t know how to switch to a ‘green pension’.

If this information gap were to be addressed by the government, industry and employers, UK consumers could collectively save up to 386 million tonnes of carbon emissions annually through their pensions – the equivalent of 11 return flights from London to New York per person.

Despite this, savings and pensions ranked last in terms of perceived impact on climate change amongst a range of factors in an individual’s lifestyle.

What is a green pension?

A green pension is a fund that aims to generate returns for savers via environmentally positive investments.

These funds normally have a stated objective of environmental considerations, such as avoiding or reducing investments in or helping transition industries such as fossil fuels, which generate large amounts of carbon emissions, and/or focusing on investments that will support reductions in carbon emissions.

With support from our very own My Green Pod co-founder Jarvis Smith, Scottish Widows’ second annual Green Pensions Report explores the growing appetite for responsible retirement savings propositions among employers and employees.

‘Tackling climate change is a global problem, and we each have a part to play. This year’s Scottish Widows Green Pensions Report has found that people are unaware of the impact their pension could have on protecting our environment. Green pensions help to reduce carbon emissions by reallocating capital from polluting industries that may not align with your values – such as arms and fossil fuels – into those which seek to underpin and accelerate a green and just transition.

‘Our pensions are a tool not only to protect our own futures, but the future of our planet. We have the means to make a difference with our pensions, and if the people of the UK all took advantage of the opportunity to switch to a green pension, we could collectively prevent almost 400 million tonnes of carbon emissions – all while hardly lifting a finger. It is one of the most important and straightforward switches you can make.’

Environmental advocate, co-founder of My Green Pod and founder of the P.E.A. Awards

Interest in green pensions

The report reveals that three-quarters (74%) of employees surveyed express a keen interest in obtaining more information about sustainable options for retirement savings.

At the same time only 10% of employees surveyed have fully switched to green pensions due to a lack of information and access to green pensions.

Just under a quarter (23%) of companies surveyed do not offer green or ethical pensions to their employees.

‘Our latest Green Pensions Report demonstrates a critical need for heightened awareness and action regarding the role of green pensions in mitigating carbon emissions.

‘Understanding of the climate crisis has changed dramatically over the last few years, with countries and organisations being bolder in their net zero targets and individuals making changes in their lifestyles to cut their household carbon emissions. Yet most people are still unaware that pensions are one of the most powerful tools at our disposal to make real progress towards net zero.

‘This report serves to spread awareness for individuals, employers and policymakers alike. By embracing responsible investment approaches for our retirement savings, we each have a tangible means to decrease our individual carbon footprint and collectively combat climate change.’

Responsible Investment Lead at Scottish Widows

Investing sustainably

In light of these findings, Scottish Widows is urging the government, employers and pension providers to make sustained efforts to educate the UK workforce about the potential environmental, social and financial benefits of responsibly invested pensions.

Almost one in seven (13%) do not realise that there are differing environmental impacts across pension funds.

Scottish Widows – which looks after nearly £166.4bn of savings for more than six million customers in the UK – uses its Responsible Investment Framework to integrate ESG in the fund choices it makes available to its customers, while also challenging the companies it invests in to behave more sustainably through its Stewardship activities.

Employers who are concerned about the environmental impact of their workplace pension schemes should speak with their providers, who can offer tailored financial information for employees to invest sustainably.

Employees who have a workplace pension provided by Scottish Widows can now use a feature called ‘Find Your Impact’ in the app to determine the ESG profile of their own pension, helping inform more sustainable choices.

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