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  • Writer's pictureThe Climate Coach

Wait, I'm investing in fossil fuel companies?

Updated: Oct 25, 2022

Possibly. Your pension should outline where your money is invested and if you can't find the information, contact your pension manager or trustees.

Defined contribution pensions - which are the most common type, are usually spread between many areas such as bonds, cash, property and equities (shares). We're focussing here on equities - where pensions are often put into global or market specific investment funds - such as an Index. This essentially spreads the investment across a selection of large companies. If you take the MSCI World Index fund as an example, you can see in the charts below (from a recent report from that fund) that it's heavily weighted towards the USA - but also has a fairly significant amount in "Energy" companies within that. You'll likely recognise some of the companies listed in it such as Apple or Tesla and you may be OK with those investments. You may also recognise some other companies such as Exxon Mobil who you may not be so happy with. With the majority of these type of investments - even the FTSE 100 in the UK, it's a similar story in that you get a mix of companies.

Ah ok, that's not ideal - what can I do?

The easiest thing you can do is to look in to your pension to see what options you have in terms of choosing where you can invest. Many pensions offer you some options of different fund types - often attached to varying degrees of risk. If you have a strong preference to avoid heavily polluting companies - it should be possible to find a way to facilitate that if one doesn't exist already.

But I can't control which companies my pension is invested in can I?

No - not directly. But Actuaries (the people who actually manage many pension funds) are increasingly looking to include carbon emissions as a measure within funds and indexes because more and more people are asking about it. Ideally, they will start looking how the companies within each fund score in terms of their total carbon emissions - and also include a measure of progress against their plans to reduce their emissions (e.g. so even the best get better).

The reason I include the point around plans to reduce their emissions is because in certain examples, e.g. a cement company - it perhaps wouldn't be fair to score them down for the emissions they produce because we still rely on cement for many things and there isn't a viable alternative that can be produced at scale yet. So in that case, you would want to factor in progress they have made to reduce their emissions (e.g. using renewable energy or implementing carbon capture technology in their process).

Easy right? Far from it - but definitely worth a look into followed by a conversation with your pension managers or trustees. We all need to be looking into all areas to reduce our emissions - including making our pension work harder for climate.

If you have any thoughts, feedback or ideas you wish to contribute on this or any other topic covered by The Climate Coach - please get in touch, we'd love to hear from you.

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