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Make My Money Matter: How pension funds can better serve their members

Blog by Tony Burdon, CEO, Make My Money Matter

The UN’s biggest ever opinion poll recently found that two thirds of people across the world consider climate change a global emergency. The insurance industry knows this all too well, hit with enormous pay-outs from fire and floods that have been driven by climate change. This week, it isn’t fires in Australia, but 1 in 100-year floods. And it is only going to get worse.

People in the UK are changing the way they travel, the clothes they wear and the food they eat and are now beginning to consider the impact of their finances. We want to see the UK’s financial services sector – one of our biggest industries – keep up with this demand from consumers.

For most of us saving into a pension, we are ‘accidental investors’, meaning that the most passionate climate activist may be investing in fossil fuels and the most seasoned doctor in tobacco. We are currently investing trillions into these businesses and other assets that do not align with our social values. At Make My Money Matter, we want savers to have a pension they can be proud of and use the hidden superpower that is their pension to help drive a more sustainable and responsible economy. After all, it’s their money.

The ‘business-as-usual' finance industry has often used fiduciary duty as a barrier to change but leading pension funds do not see it that way. There is scope to listen and respond to members as long as there is no significant detriment to returns and we know that tackling ESG risk seriously is actually providing above market returns. Moreover, leaders in industry realise that climate related financial risks will damage member savings and that this isbest tackled through aligning portfolios to net zero emissions.

Our campaign is calling for major UK pension schemes to commit to net zero emissions ahead of COP26 in Glasgow this year. Among the firms who have made commitments are Phoenix, Scottish Widows, Aviva, NEST and the BT pension scheme. Many local government schemes have committed too. That’s over 20m pension pots that will now be aligned to net zero and nearly £400bn assets under management. This is fantastic progress but clearly not enough. We estimate this still leaves more than £2 trillion contributing to three to four degrees of warming which will devastate both our planet and the future wellbeing of pension members.

Our ask will not only drive better returns for members but build a world fit for their retirement. We want pension funds to align to net zero, mainstream ESG across their entire fund, grow the elements of their portfolio that are invested for impact and to listen and respond to member interest where appropriate.

When we look ahead to COP26, we hope to see all UK pensions funds lead on net zero but also the wider financial sector too, asset managers to net zero, investment consultants committing to provide Paris Aligned advice, and the banking sector too.

This year, we want all UK pension holders to contact their provider or employer, and all UK businesses their staff pension scheme, and get them to commit to net zero, and if that fails move, where possible, to a leading pension fund that is aligned to net zero. It’s time for all of us to make our money matter and build a healthier world for us and our children.

Last updated 22/04/2021