Leading workplace pension provider calls for industry focus on climate change

A leading workplace pension provider is calling for the pensions industry to focus its climate change efforts on default funds, as new research finds that almost eight in 10 people (78%) consider climate change important, but only 2% have changed where their pensions are invested as a way to tackle it.

In light of this month’s UN Climate Change Conference in Glasgow, B&CE, the provider of The People’s Pension¹, a workplace pension scheme with more than five million members, found from those they surveyed, that the following had been done to reduce their personal impact on climate change:

• Almost six in 10 (58%) saved energy use
• Almost two thirds (65%) used reusable items
• Eight in 10 (81%) recycled their rubbish
• More than a third (36%) compost food rubbish
• Just over a third (35%) drove less
• Almost three in 10 (28%) flew less
• A third (33%) bought locally grown food
• Only 2% changed where their pension savings were invested

The survey of more than 2,000 people, conducted by YouGov², found that pension savers are interested in responsible and sustainable investment, with almost half (49 per cent) wanting their pension company to invest ‘ethically’ on their behalf.

Suzanne Mulligan, 39, from West Sussex, wants her pension invested responsibly by her provider:

“We’ve made a lot of changes at home to reduce our impact on the environment – we use reusable items, we buy locally, and we recycle everything that we can. But I’ve never considered changing where my pension savings are invested.

“I’m not a financial expert and I don’t think I should be expected to be. I’d like to trust that my pension provider will invest sustainably on my behalf, that they will do the right and responsible thing with my money.”

Like with many pension schemes, the majority of members (98%)³ at The People’s Pension are in its default fund – the fund they automatically join as a member of the pension scheme. It believes that the largest impact on climate change can be gained by the industry focussing its effort on default funds, rather than creating stand-alone funds.

The People’s Pension has already taken steps to reduce the net emissions in a portion of its portfolio, by applying a carbon-tilt on a portion of assets in its default fund⁴, reducing carbon emissions intensity and potential emissions from fossil fuel reserves by 50 per cent. It is working to manage climate risk across the whole portfolio, and, from the mid-2020s, intends to use new contributions to smooth its transition to a net zero portfolio.

Commenting on the findings, Jon Cunliffe, managing director of investments at B&CE, provider of The People’s Pension, said:

“Climate change is of real importance to savers and it’s clear they want their pension provider to invest responsibly on their behalf. Rather than expecting savers to move their money to climate specific funds, pension providers should operate in the best interest of savers by ensuring their default funds invest responsibly and work to tackle climate change.

“At The People’s Pension, we’ve already taken steps to reduce the net emissions in a portion of our portfolio, investing in a way to significantly decrease the amount of fossil fuels and greenhouse gas emissions across our investments.

“We believe that climate change is a material financial risk to members’ pension savings, meaning we are seeking to manage climate risk across the whole portfolio. We also believe that this will have the most impact in aiding the transition to a net-zero economy.”

ENDS