Six out of the 10 largest DC pension providers have yet to publish 2025 emission reduction targets, seen as a key part of hitting net zero targets.
This was one of the headline findings in a new report from campaign group Make My Money Matter, which says workplace pension providers are failing to keep pace with the action required on climate change, despite the momentum generated at last year’s COP26 in Glasgow.
The report, which references Corporate Adviser’s research in this area, highlights a number of shortfalls when it comes to climate action. It says just four out of the top 20 providers have made commitments on eliminating deforestation from their portfolios.
Large DC schemes say that they engage with their portfolio companies and asset managers to drive their transition to net zero, yet the MMMM research found that only 10 providers have explicit climate voting policies which expect companies to align with global temperature goals.
The report also found that not one of these top 20 schemes scheme has a policy to end fossil fuel expansion. MMMM says this is integral to reaching net zero, and this lack of policy undermines schemes claims that they are working as effective stewards of savers’ funds.
MMMM says it also contradicts guidance from the International Energy Agency that there is no need for any new oil and gas developments.
MMMM says there has been progress when it comes to schemes ESG policies addressing climate change, with 60 per cent of the top 20 providers stating they have plans to increase their investments into climate solutions. However MMMM says that these plans are not yet at the level of ambition needed to significantly scale up industries that offer us a way out of the climate crisis – such as renewable energy and green infrastructure.
As COP27, gets underway in Egypt, MMMM is calling on all UK pension schemes to address these issues and commit to five key goals. These are:
- Set short-term 2025 emissions reductions targets to ensure urgent net zero delivery
- Commit to eliminating deforestation from portfolios
- Set clear climate voting policies that expect companies to align with temperature goals
- Set policies to end fossil fuel expansion
- Turbocharge investment into climate solutions
Film director and MMMM co-founder Richard Curtis said: “Now is the time for action on climate – words are not enough. Since 2020 pension providers have committed £1.3 trillion to net zero, and this is important progress: but now the time has come for them to move beyond targets and take real action for real world impact.
“That real progress is already falling dangerously behind. We hope this report highlights the clear gaps in the climate action of UK pension schemes and urges them to refocus for 2023; directing their immense power and potential to address the twin challenges of climate change and biodiversity loss.
“We need pensions with purpose – we need to make our money matter in building a better world. By putting the £3 trillion in UK pensions to work in service of the planet, and pivoting from climate commitments to real action, the pensions industry can maintain the momentum generated over the past 12 months, and make sure our money is building a world fit for our retirement.”
MMMM CEO Tony Burdon added: “Twelve months on from COP26 in Glasgow, climate action from the UK pensions industry remains insufficient and fragmented.
“We hope this report acts as an urgent wake up call to the pensions industry – highlighting the absence of clear, co-ordinated and consistent climate action to date – while showcasing the critical steps that must be taken to get back on track.
“By putting a laser focus on short term targets to reduce emissions, improved stewardship, eliminating deforestation increasing investments in climate solutions and stopping the financing of fossil fuel expansion, the UK pensions industry can become world leaders in climate action, helping protect the planet, and secure long-term profits for their members.”