Is your pension fuelling the climate crisis?

by | Apr 18, 2024 | Blog

Pensions, which are designed to secure our future, may be putting it at risk. These powerful funds — worth more than US$55.7 trillion in global assets and accounting for 69% of GDP across 22 major markets — are quietly funding the climate crisis through major investments into fossil fuels (as Oblivia Colemine chillingly informed us) and deforestation. Ironically, these investments are jeopardising the future we are saving for. But it doesn’t have to be this way.

Pensions fund fossil fuels. £3 trillion is currently invested into UK pension funds. More than £88 billion is invested in fossil fuel companies, the biggest contributor to climate change and accounting for more than 75% of global emissions. In 2021 and 2022, Local Government Pension Scheme (LGPS) funds had invested £16 billion in the fossil fuel industry, according to research by Platform and Friends of the Earth. This money not only funds existing oil and gas projects, but supports expansion. More than half of LGPS funds in the financial year 2021-2022 went into new oil and gas projects. Pension fund bond investments also drive the funding of fossil fuels. Bonds are fixed-term loans that investors provide to governments or companies that underpin the financing. 50% of fossil fuel financing comes from corporate bonds, and bonds account for the largest source of financing for coal in China and India, according to the Toxic Bonds Initiative.

Pensions may drive deforestation. In the UK, more than £300 billion of pension fund investments go into companies with a high risk of driving deforestation. These include companies involved in palm oil, soybeans, beef and timber. For every £10 put into a pension, £2 could be linked to companies causing deforestation. Deforestation poses a major threat to the natural world, contributes significantly to climate change and can be linked to serious human rights abuses. More than a quarter (27%) of deforestation results from agricultural products. These agricultural commodities are also exposed to physical climate risks such as extreme weather events, droughts and rising mean temperatures, potentially making them risky investments.

Pensions can be part of the solution. People eat less meat, switch energy providers and travel less to cut their carbon footprint, but they don’t typically think about their pensions. Instead of funding companies that are damaging the environment, pensions could be part of the solution. ‘Green pension funds’ aim to generate returns for people by investing in companies that have a positive impact on the environment. If UK consumers were to collectively participate only in green funds, up to 386 million tonnesof greenhouse gas emissions could be eliminated each year, according to the Scottish Widows 2023 Green Pensions report — the equivalent of 11 return flights from London to New York per person. Pensions represent a substantial investment pool for already available climate solutions, such as technology-based carbon removals and innovative renewable energy projects. These solutions are in desperate need of funding to scale up quickly. They have the power to significantly reduce and drawdown (when emissions stop rising and start to decline) global emissions. By moving their money, people and pension providers can play a pivotal role in addressing the causes of climate change whilst driving the transition to a low carbon economy. UK pensions alone have the potential to invest £1 trillion in climate solutions, like renewable energy, by 2035. Organisations like Make My Money Matter are on a mission to encourage people to ask pension providers to go green by moving investments away from companies funding fossil fuels and driving deforestation.

Some pension funds are already making a difference. Some funds are moving away from investing in fossil fuel and high emitting companies. Netherlands-based PFZW, one of the largest pension funds in Europe, announced that it has exited investments in over 300 fossil fuel companies, including Shell, BP and TotalEnergies, over a lack of convincing decarbonisation plans. The Church of England Pensions Board, which manages roughly £3.2 billion, said it will exit the oil and gas sector, along with some of the highest emitting industries such as airlines, utilities and steel companies.

Despite some changes, progress is slow. It will take a global effort from multiple parties to change the pension industry. Governments can tighten legislation on pension providers. Funds can be more transparent about their investments and diversify away from industries fuelling the climate crisis. People can speak to their pension provider (directly or via their employer) to find out where their money is going. Once they know the full story, they can decide whether their current pension plan matches their values and understand the other investment options available to them, along with any associated risks.

The purpose of a pension is to invest in our own future. But the pension itself could be damaging that future. The choices we make over where we put our money gives us more influence than we realise. We can use our savings to support a greener, cleaner and healthier future for all.

Girls’ education – one of the most powerful ways to tackle the climate crisis

by | Mar 6, 2024 | Blog

An estimated 129 million girls are not in school around the world. That is more than the entire population of Japan or Mexico missing out on the opportunity to learn to read and write, to access better jobs and to escape poverty.

Those girls will also grow up without an understanding of our changing climate and how they can help their community to adapt to, address and mitigate the effects of climate change. They will be more vulnerable to climate-related shocks. According to the United Nations, 80% of people displaced by climate-related events are women and girls.

Countries that have invested in educating girls have experienced far fewer deaths from droughts and flooding than countries with lower levels of girls’ education. It is estimated that climate-related deaths in sub-Saharan Africa would drop by 60%, if 70% of women aged 20-39 years completed early secondary education. Education fosters an understanding of the risks and empowers people to decide how to respond for the benefit of themselves and their families, whether that is changing the crops they grow to more drought-tolerant varieties or taking shelter when water levels rise.

To date, multiple factors have prevented girls from going to school, including war, poverty and religious and cultural beliefs. Climate change is adding to the list of barriers. Research shows that girls across Asia, Africa, South America and the Caribbean are increasingly dropping out of education due to the impact of extreme weather events. Schools are destroyed. Flooding, fallen trees and collapsed bridges make the journey to school impossible. Failed harvests leave families destitute, often with no option but to send girls out to work or force them into early marriages.

By 2025, climate change will be a factor in preventing around 12.5 million girls from completing their education. But reversing this trend will have a massive impact. Project Drawdown lists equal access to education supported by voluntary access to family advice among the most powerful solutions to the climate crisis – third only behind reducing food waste and the transition to plant-based diets. By 2050, universal education could help to reduce greenhouse gas emissions by almost 70 gigatons – or close to twice as much as was emitted globally in 2022.

Education supports climate resilience and small gains matter. The Brookings Institute calculates that a country’s climate resilience score on the Notre Dame Global Adaptation Initiative index increases by over three points for every additional year of education that girls receive on average.

Jacinda Ardern attracted wide-spread praise for her leadership on climate issues during her time as Prime Minister of New Zealand. However, she is not alone in taking bold climate action. A review of the climate policies in over 90 countries found that countries with strong female representation in national and regional governments have implemented more stringent climate policies. This has resulted in more rapid progress to cut emissions. Education is not the only factor in increasing the proportion of women in government — economic, political orientation and cultural factors also play a role. However, education is critical to equip girls with the skills and knowledge they need to enter politics.

There have also been suggestions that a shift in mindset around gender equality stimulates a shift in views about the planet and environment. Links have been identified between exploitation of people, including women and girls, and exploitation of nature and natural resources. A path towards equality for women and girls helps to stamp out exploitative practices generally, according to the Malala Fund.

The Malala Fund has suggested four priorities that would provide young people, both girls and boys, with the skills and values that they need to build and thrive in climate-resilient economies:

  1. Ensuring all girls benefit from 12 years of school and learning;
  2. Giving girls an expanded vision of green skills beyond vocational education in sectors such as renewable energy and forestry;
  3. Promoting sustainable values through climate education; and
  4. Empowering students to take action on climate justice.

It will take a global effort on the part of governments, communities and individuals to get more girls into schools. But with girls’ education being one of the most powerful ways of tackling the climate emergency now and for generations to come, it is an investment worth making.