Interactive Investor

How to respond to bombshell UN climate report via your pension

18th August 2021 12:26

Katie Binns from interactive investor

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In the wake of a warning from the UN that climate change is in danger of accelerating quicker than expected, we look at how to use your pension to fight it.

A recent UN report on climate change paints a devastating picture for the future of the planet if immediate action isn’t taken. The Intergovernmental Panel on Climate Change (IPCC) warned we could be just 10 years from a climate tipping point. 

An increasing number of us are choosing not to fly, to eat less meat, or only buy sustainable products. However, one of the biggest ways you can affect change is by where you invest your money.

There is an estimated £2.6 trillion in UK pensions, a large proportion of which finances environmentally harmful industries such as fossil fuels and deforestation. If you don’t want to invest this way, you can take action.

Most workplace pensions should offer an “ethical” option which you can easily switch to. If not, speak to the pension provider and find out what funds they offer.

Campaign group Make My Money Matter, launched by Comic Relief co-founder and Love Actually director Richard Curtis, has a template email to encourage pension providers to move to net zero. 

interactive investor’s Family Money Ambassador Gabby Logan recently spoke at length to the award-winning screenwriter about his attitude to money, ethical investing and much more. To hear the full-length interview, click here.

You can also ask your employer about adding ethical funds. Again, Make My Money Matter has a handy template to help you.

While employers are not legally required to provide ethical pension options, public opinion and upcoming government policy might sway them. The Department for Work and Pensions announced in June that pension scheme trustees will soon be required to report on the risks of climate change to their investments.

If you’re a member of a defined benefit pension, contact the pension trustees to find out where the funds are invested. For those with old workplace pensions, look at what options are available within these plans and consider transferring them, so you have more control over how they are invested.  

Picking investments is tricky. Decide what is important to you and what your red lines are.

If you want to avoid fossil fuels, oil giants will clearly be a no-go, but what if those companies are investing heavily in renewable energy? Oil company BP (LSE:BP.), for example, aims to install 70,000 electrical car chargers by 2030. 

Always check a fund’s entire portfolio - not just the top 10 holdings. Familiarise yourself with the jargon - everything from ESG, thematic and impact. Financial experts can sort the green from the greenwash.

There is also interactive investor’s ACE 40 fund list to consider. Experts at ii have curated a selection of 40 best-in-class ethical investing options from a list of more than 140 funds, trusts and ETFs.

These articles are provided for information purposes only.  Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties.  The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.

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