Research from Make My Money Matter into the £3tr UK pensions market has shown that the total related carbon emissions stand currently at 330 million tonnes each year.

In addition, £88bn of UK pension savers’ money is invested in fossil fuels and £300bn is invested in companies with a high risk of deforestation.

The organisation has also ranked the UK’s largest 20 Defined Contribution (DC) pension providers on their ‘approach’ to tackling climate change. The analysis looks at the publicly available climate documentation and assesses their performance on a range of measures, from setting emissions targets to fossil fuel financing, from tackling deforestation, to investing in renewable energy.

This analysis was developed in partnership with Profundo, a sustainability research provider, from September 2023 to January 2024. For the purposes of thereport, the term ‘plans’ is used to refer to the extent to which each pension provider has effective objectives, policies, and instruments in place to respond to climate change.

The top three ranked providers were Aviva, Legal & General and Nest 3rd.

It was just these three that were also deemed to have ‘adequate’ climate plans in place.

Another13 providers were deemed to have 'inadequate' plans, with significant gaps in their climate action. On both fossil fuel financing and deforestation and land, all providers were found to be 'inadequate' or 'poor'.

For example, many providers report that they invest in “climate solutions” and almost half publish a climate solutions investment strategy, however, definitions are fluid or lacking and providers do not often have clear targets and benchmarks for progress.

Just over half have made a form of public commitment to tackle deforestation, but very few have set comprehensive policies. Furthermore, all providers need to measure and set targets for wider Agriculture, Forest, and Other Land Use (AFOLU) emissions.

Most pension providers have limited policies concerning investments in fossil fuel producers.

Although providers generally commit to net-zero, and 1.5C, it was noted that many of these providers do not explicitly mention 1.5 C in their policy, but rather make a robust net-zero commitment including halving emissions this decade and/or a net-zero date well before 2050. Within this, the majority do not say what role carbon offsets play in their climate strategies.

On a more positive note, providers tended to use internationally recognised methodologies to measure and disclose the carbon footprints of their portfolios and disclose by asset class.

---