Your pension is one of those investments that you might have thought a little less about, but taking some time to work out where it’s going is good for your money and good for the planet.
At COP26, conference President Alok Sharma drew attention to the importance of greening pension funds in mitigating the climate crisis. He pointed out that $47tr is at stake in pension funds globally – that's a lot of money that could be changing the world! But what can you do to make sure that your pension is doing good?
So what's a green pension?
Broadly, there are two types of pension in the UK besides your state pension – a workplace pension or a personal pension. A workplace pension is one that your employer signs onto that you can enroll on, where you and your employer both add money. A private pension is arranged by you rather than your workplace. A pension fund invests your money for you, with the goal of increasing your money before you retire.
A 'green' or ESG pension is a catch-all term for a pension fund that seeks to invest primarily in companies that have net-zero values or are doing good for the planet. ESG stands for environmental, social, and governance, which are factors that those running the fund should be prioritising.
There’s not a binding definition of ESG, which means that it’s worth looking beyond just the name in the title when you’re examining your own pension. Funds could be investing in companies that score highly in terms of their social impact, but could also be polluters at the same time! It’s worth digging in a little even if your company is signed up to what seems like a green pension.
My company is signed up to a scheme that doesn't seem great. What should I do?
When you started working with your current employer, you might have enrolled onto your workplace pension scheme without knowing much about how your money is actually being invested. In some ways this is the point of a pension – it’s a way of generating long-term savings that you don’t need to be actively checking up on all of the time. But that also means that you might be investing your savings in companies that don’t align with your values!
Particularly after the COP26 conference, many companies are making commitments to net-zero values. You can leverage this in speaking to your employer about the pension fund they sign up to, and encourage them to sign up to a scheme such as the green pensions charter, where employers call on pension funds to agree to net-zero targets.
They’ve even created a guide for employers outlining the benefits of looking for a green pension fund, and how to evaluate if the current workplace fund is meeting ESG standards. It might feel easier to just opt out of your workplace scheme, but speaking with your employer about the pension fund that they sign onto can make a big impact! 🚀
I'm a freelancer – what should I look out for?
If you’re self-employed or have a personal pension, you might have a bit more control over the pension fund that you choose to invest your savings in. How you set up your pension as a freelancer is a whole topic in itself (this guide is a great starting point!), but one of the upsides of freelancing is that you have a larger say over your choice of fund.
The employer guide by Make My Money Matter is still relevant if you’re self-employed. They suggest that a green pension will have 4 key factors: aiming to go net-zero across all assets, investments into climate change solutions, engagement with companies they invest in to encourage them to reduce emissions, and controlled divestment from industries such as coal and oil.
The guide even includes a list of questions you can use when speaking to possible providers of your personal pension so that you can grill them and make sure that they’re putting their money where their mouth is!
Here at Your Juno, we believe that your money is a vote for the kind of world you want to live in. As a freelancer, you can have more control than most over exactly where your money is going, so you can take advantage of that and make sure that your pension is doing good.
Thinking about the climate crisis can be difficult, but the good news is that pension funds are getting greener. Just this November Nordic and UK-based pension funds committed to investing $130bn in clean energy and climate investments by 2030. Your pension can do good for both your future and for the planet’s future, so make your money count!