Guy Opperman says vast amounts of pension cash can be used to ‘nudge, cajole and vote’ firms into being greener.
Pension savers are being encouraged by a government minister to help the fight against climate change by investing their retirement pots in low carbon companies.
Guy Opperman, the pensions minister, said people can support the transition to a net zero carbon economy by paying more attention to where their nest eggs are invested.
“People who want to play their part in the net zero effort should engage with their pensions and encourage sustainable investments”, Opperman said.
Parliament passed legislation last June requiring the government to reduce the UK’s net emissions of greenhouse gases by 100% (relative to 1990) levels by 2050. The aim is to make the UK a ‘net zero’ emitter.
Net zero means striking the balance between the amount of greenhouse gas emissions produced and the amount removed from the atmosphere.
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Pension savings are a key way of hitting this target by giving financial support to companies and projects involved in green initiatives and greenhouse gas reduction.
Last year, UK pension savers made total contributions of £241 billion, representing a 10% rise over the level of 2018, according to the UK Pension Market Report 2020.
Opperman said that money could give pension savers a way to influence business decisions and push firms towards low-carbon operations.
“It is a partnership with business that is the way to achieve the innovative change required. By investing in assets, trustees can nudge, cajole, and vote firms towards lower-carbon business practices,” he said.
Banks and institutional investors such as pension funds are paying more attention to the environmental impact of the companies they invest in.
Even BlackRock, the world’s largest asset manager and long-term sceptic about green investing, this year made it a central part of its strategy.
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Opperman said individual savers should also review their pension funds to see how they can best use their financial investments to do good, with workplace savings the most obvious opportunity for sustainable investing.
The automatic enrolment of workers into pension schemes has created more than 10 million new pension savers since 2012. Last year, contributions to workplace pensions represented 70% of total contributions, according to the UK Pension Market Report 2020.
Opperman also endorsed the Make My Money Matter campaign, set up by screenwriter Richard Curtis, which aims to engage savers with their pensions and encourage “sustainable” investment.
Simon Thompson, chief executive of the Chartered Banker Institute, said making green and sustainable finance mainstream requires “substantial and significant changes” across our financial system, in business and society.
“The finance profession and finance professionals must play key roles alongside governments in leading the systemic change we need to protect people and planet,” he added.
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