The good, the bad and the ugly: what are pension funds doing about climate change?

They have the power to fight climate change and change the world, but some of them need to get a move on. Bex Hay of ShareAction writes about how pension funds are doing in tackling the biggest environmental threat of all.

In the last three months, the Pension Power movement has contacted over 150 of the biggest pension funds in the country, challenging them for answers on: how much of our pension money is currently invested in industries supporting a low-carbon future and whether they will commit to a target for increasing these investments.

The answers are more varied than a tin of Quality Street (with a few ‘green’ triangles), so here’s a breakdown of the good, the bad and the ugly of where our pension funds stand – and how we can continue to keep the pressure on. Where does your fund fit in?

Pension funds making progress to fight climate change

Scoring the ‘Toffee Deluxe’ for action on climate change, these funds – some through prolonged pressure from savers – have committed in some way to tackle climate risk and are investing in sustainable alternatives. Importantly, they are communicating what they’re doing to protect people’s pensions in the long term. Some examples include:

– A target to steer at least 25% of assets into the green economy by 2015 (The Environment Agency)

– Proactively investing in renewables and green tech, Lancashire County Council Pension Fund has committed up to £200m to various clean energy and waste reduction funds, including a UK solar co-operative

– In response to all the emails, the Pensions Trust has confirmed it is formulating a climate change policy and assessing the carbon footprint of its investments, in line with ShareAction’s Green Light report

– Using the Environmental Opportunities index by FTSE, the Railways Pension Scheme invested in 97 out of 100 of these projects, with a value of around £289m – and has committed to exploring more low-carbon options

What next? It’s a good start, but even these pension funds could to be doing more. Some could be open to meeting with their members to explore further action. If you are in one the funds mentioned, or have a similar reply, please email jo@shareaction.org.

Pension funds who need more encouragement

While not making explicit commitments, these funds are demonstrating some promise by taking the time to engage with their members and admitting that climate change needs to be taken seriously:

– After a high volume of emails and a lobby by members outside the institutions meeting, the CEO at USS came out to talk to them, agreeing to answer their questions in the meeting and follow on the discussion later

– At West Yorkshire Pension Fund, campaigner Tim Padmore went along to the annual general meeting for members – asking challenging questions on whether they will fight climate change, and has now entered a longer term dialogue directly with his fund to address the answers

– One of the largest insurance companies, Aviva, also responded to a high volume of emails with interest to engage further with its customers on climate change, and consider ShareAction’s Green Light report in the next steps.

What next? These funds are open for further engagement – and need to be pushed to commit to a low-carbon economy. ShareAction is assisting campaigners to keep the pressure on. If you are interested in getting involved, and might like to attend a training to find out more, please email greenlight@shareaction.org.

The ‘room for improvement’ camp

Some funds have mentioned restrictions on their fiduciary duty (a duty to maximise returns for their savers) as a reason to not consider environmental or social issues in their investments. This is an outdated (and incorrect) view of fiduciary duty, which also ignores the financial risk posed by climate change to people’s pensions.

A few pension funds honestly acknowledge that they couldn’t answer the questions. While not entirely reassuring, this means the savers could follow-up by asking what alternate steps the pension fund was taking to manage the risk of climate change.

What next? These pension funds can be sent back to the starting block with a mythbuster on fiduciary duty. If you have received a response along these lines please get in touch at greenlight@shareaction.org.

Can I get a translator please? The ‘fob off’ and the ‘fudged’ response

From sending a link to a customer complaints form, to a full breakdown of holdings in sustainable industries, some of us have been bombarded with jargon, possibly designed to deter further correspondence.

Although a few funds replied with what, at first glance, seemed to be fairly comprehensive overview about their ethical investment practises and company engagement strategies,  they failed to actually answer the question about whether they will commit to low-carbon investments.

What next? The fudgers can’t escape the question forever. If you forward your response to greenlight@shareaction.org, the ShareAction team can help you by drafting a suitably polite response that suggests, while acknowledging that the information that they’ve sent is interesting in its own right, an answer to the question you actually asked would be nice.

We’re still waiting…

A couple of big pension funds, including those who have joined the new auto-enrolment market, have yet to respond to their emails.

We trust a significant proportion of our savings to our pension funds – so they must be accountable to their members. The financial crisis has damaged people’s trust in the entire financial sector so by refusing to reply to members’ emails these funds are perpetuating the idea that they are vast, unaccountable institutions, indifferent to the people whose money they invest.

What next? Get in touch with the ShareAction team and we’ll see what can be done to chase your fund. Remember, it’s your money, and you’ve got a right to a reply.

So there you have it. It’s a mixed bag, with some real promise and some woeful underachievers. But for every fund trying to dodge the question, there’s been some encouraging commitment to addressing climate risk – and the pressure of the pension power movement is being felt across the industry.

Bex Hay leads on the digital engagement and strategy of ShareAction’s campaigns. She joined in July 2013 and has previously worked with a number of campaign organisations including ActionAid UK, 38 Degrees and Love Music Hate Racism. She holds a BA in modern history and politics from the University of Oxford. This article originally appeared on the ShareAction blog.

Further reading:

Pension schemes far from investing responsibly, new league table shows

‘Urgent action’ required to protect pension savings from climate change

Pensions minister: investors who see climate risks have ‘competitive advantage’

Are pension funds serving their purpose?

Pensions Trust boosts responsible investment credentials with climate policy