Friday 22nd April, 2022
Could your pension help stop climate change?
Today, as we mark Earth Day 2022, we’re talking about responsibility, sustainable investing and how your pension could hold the key to building a better future.
As the threat and impact of climate change become clearer year after year, we as individuals are left with a single burning question. What can we do about it?
Let’s say you wake up tomorrow and make a decision. You want to do something. You decide to clear your local beach of litter.
You head down, armed with a litter picker and get to work. After 8 hours of work, you’re done. No more nasty crisp packets, cigarette butts or discarded drink cans.
But then a truck arrives.
Just as you’re finishing up, wiping the sweat from your brow and patting yourself on the back for a job well done, the truck reverses onto the beach and dumps its load.
The same thing happens the next day and the next day and the day after that.
Sadly, this is often what happens when we act sustainably. We do everything we can on a personal level, but the impact of large organisations makes it pale in comparison - it's just not enough on a macro scale.
Our hearts are in the right place and we’re making the effort by going green, reducing waste or minimising our carbon footprint. But when you compare the acts of an individual to a global corporation, it’s a drop in the plastic-filled ocean.
Is it pointless? Are we doomed to fight a losing battle? No. Because, as savers, we have a secret weapon. Our pension.
Today, over £2.7 trillion is saved away in our pensions. That comes from our personal savings, as well as contributions from our employers. But where does that money actually go?
You may not know that everything you pay into your pension is invested. Your money will be used to purchase a small portion of investments like government bonds, property, commodities and, most importantly, companies.
Part of your pension contributions goes into a giant pool of saver's money, known as a ‘pension fund’. This fund then uses the millions of pounds it has amassed to make purchases in giant corporations across the world.
Now here’s the interesting part.
This makes you an indirect shareholder of some of the largest companies on the planet. Your pension contributions, your savings for the future, are helping companies grow. The question is: which companies?
You may be surprised to learn there's a high likelihood that your money is helping fund some of the biggest companies on the planet, including Amazon, Apple, Tesla and Netflix.
Diving a little deeper, you may be surprised to see which industries you're contributing into - from entertainment and retail to fossil fuels and even tobacco.
If that shocks you, you're not alone. You may even feel disheartened to learn that your money may be going towards organisations in direct conflict with your personal ethics and beliefs. However, you shouldn't despair. Your pension has options.
There are a number of ways you can use your savings to help build a better future through your pension. Whether its choosing where your invest your money or even holding those businesses accountable, it all starts with taking a closer look inside your pension.
Here are 3 powerful ways you can put your savings to good use.
Your first step should be taking a looking at your current pension plan. Log in to your online account or check any paperwork you've received to find out which pension plan you are on.
From there, some quick googling should reveal a little bit more of the make-up of your plan, although finding out which specific companies are involved may prove tricky. Check out our article on how to find out where your pension is invested for more on that.
The Make My Money Matter campaign does a great job at highlighting just how impactful our pensions are and also revealing a little more about how
Many providers now offer a sustainable plan that prioritises ESG investments (investments that our deemed to be ethical, sustainable and fairly governed) so it's worth considering switching to one of these plans if that better suits your values.
However, not every pension provider will have these options. Or perhaps you feel that even their sustainable option doesn't go far enough. What you should you do in this situation?
If you aren't happy with your investment options, your first move should be to let your pension provider know.
Chances are you not alone and if enough people feel strongly, your pension provider will have to think about whether their offered plans truly reflect the values of their savers.
It's not unheard of for savers to directly influence the plans offered by their pension providers, or even the decisions made by the fund managers who are ultimately responsible.
In recent times, progression in the world of investor power has led to a whole new opportunity for savers to make their voice heard.
Today, selected pension providers like Penfold let you have your say by opening the door to the boardroom, the key decision-makers at the head of these companies. Here's how it works.
Throught the year, large businesses will hold meetings with leading decision makers known as Annual General Meetings (AGMs).
At these meetings, key investors and members of the board discuss the future of the company and any issues deemed pressing. These issues often include things like sustainability, equality policies and more.
As an indirect shareholder in these companies, you are represented at these meetings by your pension fund manager. In the case of Penfold, this is BlackRock or HSBC.
Now you can share your preference on the outcome of these decisions by 'voting' through your pension. Simply sign in, choose the issues that matter to your and vote for or against the proposal - right from your phone.
If enough of your fellow savers agree, your fund manager will share the outcome of the vote with the company itself, influencing their decision.
Your savings have helped define the future of that business and, crucially, the future of our planet. to find out more about using your pension to vote, read all about our Explore Your Pension tool.
Saving for your future is a good idea. Making sure that the future includes a healthy planet is an even better one. The world of finance and investing has been transformed in recent times, with everyday savers finally afforded the access and independence they deserve.
If you want to make a real difference in what the world of tomorrow looks like, it could very well be worth putting your money where your mouth is.
To find out more and start using your savings to save the day, follow our Pension Power campaign today.