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Move over fossil fuels, there’s a new way of investing

By Mike Narouei, Content Producer at Boring Money

3 Feb, 2021

By Clare Reilly, Chief Engagement Officer at PensionBee

Sponsored by PensionBee

- “It’s crazy that our banks and our pensions are investing in fossil fuels. These are the very things that are jeopardising the future that we’re saving for”

Sir David Attenborough, quoted from A Life on This Planet

When considering resolutions to help pursue a greener lifestyle this February, your pension is probably one of the last things that springs to mind. However, what we do with our retirement savings is in fact one of the most significant decisions we can make in reducing our carbon footprint, helping to protect our futures and the planet’s too.

Climate change is no longer classified as a social responsibility issue but a real financial threat to businesses, the economy and financial markets. And for those of us planning ahead for a happy retirement, the predicted damage to our climate, and subsequently global economy, will see our pensions stretch far less than expected unless we take action now.

Pensions can often be shrouded in mystery, with many workplace pension savers particularly unclear about how and where they’re invested. Indeed a recent survey from Boring Money showed that 23% of savers don’t even realise their pension is invested at all! But regardless of your level of understanding about how pensions work, it can be unsettling to learn of the contradiction between investing your retirement savings in the same fossil fuel companies that are destroying the planet.

Pensions are invested in oil, gas and coal companies because they’re invested in the largest stock markets of the world, which closely mirror the FTSE 100 or its American counterpart, the S&P 500. In these stock markets you’ll likely find many companies you know, including Apple, Microsoft and Amazon but you’re also likely to find major oil producers, like Shell and BP. Regardless of your views on these companies, the ability to remove them from your pension has not historically been possible in a way that was simple, cost-effective and didn’t require an in-depth knowledge of how the investment system works.

In recent years, the demand for investment options that don’t force savers to compromise on their values has been steadily increasing. In a huge step forward for workplace pension savers, the government-backed auto-enrolment provider - NEST - banned investments in companies involved in mining, oil from tar sands and arctic drilling for its 9 million members in July of last year. It also pledged to fully decarbonise its portfolio before 2050 and following this example more workplace pension providers are now willing to follow suit.

At PensionBee, we’ve been hearing from customers who are deeply concerned about climate change since mid-2019. We’ve welcomed their feedback and in response have made it our mission to build a pension that balances saving for retirement while investing in companies that play a positive role in the world.

As a result, we’re proud to have recently launched one of the UK's first mainstream fossil fuel free pensions in partnership with Legal & General. Designed for the significant proportion of our customers who want the option to exclude fossil fuel producers completely, the new plan also avoids persistent violators of the UN Global Compact, tobacco companies and manufacturers of controversial weapons. By following the market performance of a select group of companies (in a completely new index created specifically for this fund), savers can also benefit from increased investment in companies committed to meeting the Paris Agreement goals.

We see our role as a pension provider as critical in building the future we want to see for both the customers we serve and ourselves. The launch of our Fossil Fuel Free Plan takes our commitment one step further seeing us offer two distinct options for environmentally conscious customers. Whether it’s engaging with fossil fuel producers to encourage them to change their business practices and reduce their carbon footprint over time (as is the strategy in our Future World Plan) or excluding them completely from the outset, we are proud to be facilitating a vehicle for change, and most importantly, allowing the voices of our customers to be heard by the pensions industry loud and clear.

PensionBee is a leading online pension provider that helps consumers combine, contribute and withdraw from their pension, all in one place.