How changing your pension can impact the planet

02 December 2021

It can be easy to underestimate the power our pensions can have when utilised to their full potential. For many of us, if we are still years away from retirement our pensions are savings which we rarely think about. Yet our pension plans are usually the largest investments we hold as individuals. The whole point of a pension plan is to hopefully gain capital for the investor – as you pay money into your pension, that money is being invested in company shares that actually result in you becoming part-owner of the company. Therefore, even though you might be someone who wouldn’t buy shares directly in fossil fuels or arms production, you might still be unknowingly funding these markets through your pension plan. With the average pension pot after a lifetime of saving equating to £61,897, we should be taking a greater interest as to which sectors we might be indirectly supporting. For example, oncologist Dr. Bronwyn King has spoken publicly about the shock she experienced when discovering her pension fund heavily invested in tobacco companies, despite spending her career treating lung cancer patients.

Moving your money to a green pension fund can mean that you are supporting important sectors such as healthcare or companies aiding the transition to a low-carbon economy. One calculation by Nordea, a Nordic financial services group, suggested that changing your savings to “greener” plans, such as your pension pot, "could generate 27 times greater improvements in a personal carbon footprint than eating less meat, using public transport, reducing water use, and flying less". Based upon the average pension pot size and the average CO2e emissions from FTSE 100 companies your pension pot could therefore be contributing to 16.4 tonnes of CO2 emissions per year. To put this into perspective, this is equivalent to operating 3.6 family cars every year.

Determined to fully align our pension pots with our company ethos, Aether has scoured the market for what we believe is the best “green” pension fund that works for our company. As of the 1st of January, Aether will be using Cushon as our new pension provider as part of our wider dedicated effort to further shrink all scopes our company’s carbon footprint. Scope 3 sources of GHG emissions can be the hardest and most intangible to target, but can be some of the largest sources of emissions. Cushon’s default pension fund is called “Net Zero”, with 50% of the pension fund’s money invested in net zero companies. The other 50% of the investments will exclude companies with activities in relation to coal, tobacco, and other companies which do not comply with the Global Compact Screening Criteria. As these companies are considered “ethical” but aren’t net zero, Cushon carries out carbon offsetting for these companies’ emissions through Vertree to ensure that, overall, the pot is still carbon neutral. However, by 2026, Cushon aims to be completely net zero, rather than having to rely on offsetting to achieve this.

It can be easy to feel powerless in influencing financial institutions' investment choices. However, the weight of pensions within the global economy is enormous, as pensions count for roughly half of all money invested in the global financial system. Non-profits such as BankTrack and the Ethical Consumer website provide rich detail on the ethical track record of banks and other financial institutions, equipping customers with the information they need to make the best decision for them. Many people hold the belief that ethical or green investment is poor investment, but this doesn’t have to be the case. For example, the Cushon pension fund has so far outperformed Aether’s previous pension fund provider. All investments carry a certain amount of risk. With the global market becoming greener and customers taking a greater interest in what their hard-earned money is funding, we can expect to see more green financial products coming onto the market. At Aether, we are definitely watching this space.

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