The majority of leading UK pension providers (85%) have ‘inadequate’ or ‘poor’ climate plans in place, according to analysis by Make My Money Matter.
The analysis – conducted between September and December 2023 — was undertaken in partnership with sustainability research provider Profundo and examines the climate plans of the top 20 UK workplace pension providers who collectively manage more than £500bn in assets and have more than 15 million active members.
The report found that despite almost all having publicly set net zero targets, not one provider was deemed to be taking a leadership role on climate action.
Aviva, Legal & General and NEST were the only three out of the 20 providers found to have “adequate” plans in place. The analysis found 13 to have “inadequate” plans and four, including Mercer, Hargreaves Lansdown, The People’s Pension and SEI, were found to have “poor” plans in place scoring an average of 1 out of 10 for climate action.
Two areas of failings were highlighted by the report. For policies related to coal, oil and gas, eight providers scored zero out of 10, and on deforestation and land use policies, all 20 were found to have “poor” or “inadequate” plans.
On average, providers scored just 3.2 out of 10. According to the research, this showed that despite some progress, the majority are still failing to implement ambitious, science-based climate plans.
Further inadequate action risks alienating pension holders who expect leadership from their provider and threatens long-term financial returns as schemes fail to sufficiently address climate risk.
Richard Curtis, co-founder of Make My Money Matter, said that the fact that 17 out of the UK’s top 20 providers have “inadequate or poor climate plans tells you all you need to know about how seriously the industry is taking this issue”.
He said: “The public will rightly be worried about these results, and we hope this ranking acts as an urgent wake up call for the pensions industry to up its game on climate change. In doing so they can help protect the planet and provide savers with pensions they can be proud of.”
Tony Burdon, chief executive officer of Make My Money Matter, added that while there are “pockets of progress” which indicate what funds could achieve if they “showed energy and ambition”, overall leadership is scarce and progress is slow.
“That’s why we now need all pension providers to recognise the findings of this report and invest in the skills and capacity needed to meet the climate crisis,” he noted.
A spokesperson for People’s Partnership, provider of The People’s Pension, said that while the provider supports Make My Money Matter and its efforts to push for real change in the industry, “addressing climate risks and opportunities is incredibly complicated and nuanced, with many different viable ways to address them”.
The spokesperson added that The People’s Pension remains committed to aligning its portfolio to 1.5°C while “working hard on the issue for a long time” to find the right solutions for its 6.5 million members to ensure it delivers value.
“We will be making an announcement about long-planned changes to the approach in the near future,” the spokesperson said.
Katharina Lindmeier, senior responsible investment manager at NEST, added that it is important that all pension schemes play their part in pushing for net zero.
“At NEST we’re focused on delivering our climate change policy and seeking out opportunities to have a real-world impact, such as challenging companies in our portfolio to set ambitious net zero targets and investing more money directly into renewable energy projects,” she said.
A spokesperson for Mercer said: “Mercer receives numerous requests to participate in surveys, which often ask for varied and divergent information on its activities and as such, Mercer does not respond to all the survey requests it receives.
“Clearly, we have some homework to do in the next year to make sure all of the information and policies that MMMM’s [Make My Money Matter] researchers measure is easily accessible and robustly evidenced”
Cushon
“Mercer appreciates that in this case its policy has resulted in an overall rating that is unreflective of its underlying activities. For more than 20 years Mercer has been at the forefront of sustainable investment research and is proud of the work it does with its clients.”
Hargreaves Lansdown, meanwhile, pointed out that it is not a defined contribution pension provider but a “self-invested personal pension provider”.
A spokesperson added: ”Nevertheless, we take our role in managing and mitigating climate and deforestation risk across our investment solutions seriously. We are due to publish our financed emission net zero strategy in 2024, which will provide more detail on how we manage these risks as well as greater transparency on where our emissions sit.”
The spokesperson added that Hargreaves Lansdown will take part in the initial trial of the ForestIQ data and is confident this “will unlock our abilities to understand our exposure to deforestation and subsequently set targets to move towards deforestation free portfolios”.
A Cushon spokesperson said the feedback received around the decision-making for some of Cushon’s lower marks was constructive. “Clearly, we have some homework to do in the next year to make sure all of the information and policies that MMMM’s [Make My Money Matter] researchers measure is easily accessible and robustly evidenced.”
The spokesperson noted, however, that as well as ranking 4th out of 20, Cushon is the only pension provider to score “good” on measurement and disclosure, and one of only three to have scored “good” for its commitment to climate targets aligned to a less than 1.5°C increase in average global temperatures.
“Of the seven criteria, we were the only provider to score “good” for two different areas – a reflection of our progress to date to decarbonise our pension offering, but we need to do more,” the spokesperson added.
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