Over the next year we will be introducing a series of ‘One Carbon Change’ blogs where we suggest one change you can make to be more ethical, carbon conscious and sustainable. For the first instalment of our One (CO2) series we are looking at ethical investments, specifically pensions.
From research conducted by Make My Money Matter, the total carbon that could be saved by switching from the Global Equity Index to a sustainability focussed equity fund can be up to 19 tonnes a year. This figure is applicable when carbon savings intensity is applied for an average pension (c.£30,000)[1]. According to research, the average UK carbon footprint per person is around 10 tonnes. This means that almost two years’ worth of a UK citizen’s carbon emissions could be saved by switching pensions[2]. The same research by Make My Money Matter also found that changing to an ethical pension is 21 times more effective than switching air travel to rail or changing to a renewable electricity provider.
When looking at ethical pension funds it is important to look at ESG (Environmental, Social, Governance) or SRI (Social Responsible Investment) funds and assess the ESG and SRI scores. SRI scores do not have such strict criteria and have broader elements included within them. Ethical funds with higher scores have a more positive organisational impact. Examples of the criteria areas are:
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Environmental: · Climate Change · Carbon Emissions · Pollution · Energy Efficiency · Biodiversity · Waste Management · Resource Scarcity |
Governance: · Board composition. · Executive composition · Audit committee structure. · Bribery and corruption · Lobbying’s · Whistle Blower Schemes |
Social: · Human rights · Community relations · Gender and Diversity · Employee engagement · Labour standards · Customer satisfaction |
Here is a list of the top ethical pension funds complied together by data from Good With Money[3] and Drewberry[4]:
- Nest – ethical fund
- PensionBee Impact Plan
- PensionBee Fossil Fuel Free Plan
- Penfold Sustainable Plan
- Aviva Self-Select Pension
- Royal London Pensions – actively looking at ESG factors. 1 true ethical fund, 6 with ESG funds
- Zurich Henderson Global Sustainable Equity Pension
- Aegon Pensions – has over 200 ethical options
- CIRCA5000
- Scottish Widows – has 6 ethical funds.
- The peoples pension -1 ethical option, but all others have ESG elements.
Changing your pension can be very straight-forward, for example, if you have a NEST pension, switching to their ethical investments plan takes around 10 seconds online(!) Or if changing providers will involve switching existing pensions over to alternate providers, this can also usually be done online using a quick and easy process. Once that switch has been made the money is continually invested in ethical projects. It is also worth checking your current pensions provider and the score of the funds you are currently invested in before making any changes.
Since the intial release of this blog, a new list by Good With Money has been published which ranks the top 20 UK pension providers on their climate plans, this can be found in their Climate Action Report 2024, and it helpful when choosing an ethical pension[5].
The One (CO2) series will explore other ways you can reduce your carbon footprint and make more sustainable choices – watch this space!
Credibly green provide net zero and sustainability strategy advice, reports and modelling, for more details see www.crediblygreen.com or call 01746 552423
[1] 21x-Research-–-July-2021.pdf (makemymoneymat.wpenginepowered.com)
[2] Could greening your money be a ‘powerful weapon’ in the fight against climate change? | Euronews
[3] https://good-with-money.com/2023/09/14/top-9-ethical-pension-funds/
[4] https://www.drewberryinsurance.co.uk/employee-benefits/guides/ethical-workplace-pensions§
[5] https://makemymoneymatter.co.uk/pensions/
