Pension fund investments are affected by, and contribute to, climate change – we’ll explain how.
We’re making the investments in the Fund better for the planet, which makes them better for your pension at the same time.
A sustainable pension is 21 times more effective at cutting carbon than stopping flying, going veggie, and switching energy supplier combined. That’s according to research by the campaign Make My Money Matter.
Better for your pension as well as the planet
We invest the money in the Fund to protect its value
We invest the money in the Fund in companies, transport, buildings, and more, around the world.
Pension investments are affected by climate change
Take a shopping centre we might invest in. Flooding, made more likely by climate change, could damage it. Droughts could destroy farmland that supplies food to supermarkets we invest in. These are risks that climate change poses.
As well as risks, there are potential benefits. To tackle climate change, we need clean energy, low-carbon tech companies, and more. Investing in companies that are well-positioned for the future helps your pension grow over the long term.
Pension fund investment emissions contribute to climate change
Most companies we invest in create emissions. For example, a technology company that makes computers emits greenhouse gases as it makes each product. And it emits greenhouse gases as it lights and heats its factories and shops, and as its employees commute in and out of work.
So we’re working to reduce those investment emissions
Reducing emissions helps protect the Fund’s investments from the risks of climate change, and benefit from the opportunities. It helps tackle climate change, while protecting the value of the Fund.
How we’re reducing our investments’ emissions:
Investing in renewable energy
We put some of the Fund’s money in investments that should benefit from the transition to a low-carbon economy, like wind and solar energy. These are well-positioned to grow in the future, and give us a return on our investment.
Using our investor influence to encourage the heavy polluters to change
By investing in a company, you get a say in how the company is run. We could just stop investing in companies that have high emissions. But this won’t solve the problem of climate change. It will just pass the problem on to the next person who invests in them.
Instead, we use our say. We vote at company meetings and work with their boards. We encourage them to reduce emissions, set climate targets, and improve how they treat the environment.
For instance, we invest in companies in Latin America, and some of these companies have particularly high carbon emissions. We’ve been using our investor influence to help Chile comply with regulations to shut down coal-burning power plants.
You can read more about our approach to responsible investment in our Implementation Statement (PDF).
We now measure our emissions every year
We report on them in our yearly climate change report, which we produce as part of the TCFD – the Taskforce for Climate-related Financial Disclosures. What you’re reading now is a snapshot of it. If you want to, you can read our full climate report (PDF).
Our progress in numbers:
We’ve set a target to get to our carbon footprint to net zero by 2040.
Reaching net zero means reducing our carbon footprint as much as possible. Any unavoidable emissions are cancelled out by removing greenhouse gases from the air, like by planting trees. That way there’s zero carbon emissions in total.
Our carbon footprint is measured by emissions intensity, which is the amount of greenhouse gas emissions per million pounds we invest.
This graph shows our current carbon footprint, and how we’re planning to reduce it over time so that we reach net zero by 2040.
Our net zero alignment
This shows the percentage of companies we’re investing in that already have plans in place to be net zero by 2050. This figure should increase over time. But it’s decreased in the last year, because we’ve updated how we calculate the figure in line with best practice.
In 2022
11.4% of the companies we invest in are aligned with the Paris Agreement
In 2023
2.3% of the companies we invest in are aligned with the Paris Agreement
These numbers cover some but not all investment emissions.
They cover:
- emissions from a company’s day-to-day operations
- emissions from the energy a company pays for
But they do not cover:
- emissions from a company’s suppliers or supply chain
- emissions from governments we lend to around the world
We are gathering supply chain emissions data, but it’s often unreliable. There’s more information about this, and how we continue to improve our emissions data, in our full climate report.