PensionBee’s ‘Fossil Fuel Free’ plan linked to oil and coal industry

Research from Ethical Consumer finds that a new green pension fund from PensionBee invests in companies providing essential services to the oil, gas and coal industry.

In December 2020, PensionBee, an online pension platform, launched its ‘Fossil Fuel Free Plan.’ According to the company’s website, the fund invests in approximately 1,295 companies and ‘excludes the fossil fuel and tobacco sectors while only investing your money in companies aligned with the Paris Agreement goals.’

However, our examination of the plan’s holdings found a number of investments in companies that are directly linked to the fossil fuel sector, through distribution or the provision of infrastructure. Although such holdings do not explicitly contradict the plan’s exclusion criteria, such holdings are likely to alarm some customers that want to keep their ethical pensions well away from the fossil fuel sector.

The plan also held a number of investments in banks, including major funders of fossil fuels, and ethically-dubious sectors including defence and gambling.

Shareholdings linked to the fossil fuel sector

The plan contains a number of holdings that did not necessarily contradict the exclusions criteria as stated below, but were directly linked to the fossil fuel sector, including:

Baker Hughes Company: a US energy technology company providing services and equipment to the oilfield and liquid natural gas sectors. In 2020 it was the sixth largest global oil equipment and services provider by revenue.

China Gas Holdings: a gas operator and service provider based in Hong Kong (though registered in Bermuda) and operating widely across China. In 2020 the Group’s total natural gas sales volume was 12.83 billion m3.

Enbridge: a Canadian company focused on the transportation of oil and gas. The company’s website states: “We move about 25% of the crude oil produced in North America, we transport nearly 20% of the natural gas consumed in the U.S., and we operate North America’s third-largest natural gas utility by consumer count.” In 2020 it was the second largest global oil equipment and services provider by revenue.

Halliburton: a US firm that provides products and services to the oil and gas sector. In 2020 it was the seventh largest global oil equipment and services provider by revenue. It has been embroiled in numerous controversies, most notably in relation to the war in Iraq.

Keppel Corporation: a Singapore-based company providing offshore solutions and services for the oil and gas industry. According to its website: “Keppel Offshore & Marine serves a wide variety of offshore needs ranging from exploration and production to transportation, maintenance and decommissioning.”

ONEOK Inc: a US gas service company. According to the company’s website it is a “leading midstream service provider and own[s] one of the nation’s premier natural gas liquids systems.”

Pembina Pipeline: a Canadian firm that owns oil and gas pipelines, as well as “gas gathering and processing facilities and an oil and natural gas liquids infrastructure and logistics business.”

Schlumberger: a US firm that provides numerous services to the oil and gas industry. Its website states: “From a well’s cradle to grave, and everywhere in between—that is where the people of Schlumberger come in.” It also advertises its services in relation to heavy oil: “We have the expertise and technologies to cover all the reservoir, drilling, completions, and production bases and bring heavy oil recovery within practical reach.”  In 2020 it was the fourth largest global oil equipment and services provider by revenue.

image: pink hands holding black coal
Image credit: Greenpeace

Fossil Fuel Free Criteria

While none of the above holdings may not technically break the fund's exclusion criteria, they are somewhat alarming to find in a ‘Fossil Fuel Free’ fund. A prime example is the US firm Halliburton, which describes itself as “one of the world's largest providers of products, services, and integrated solutions for oil and gas exploration, development, and production.” 

Haliburton may not have actual reserves of fossil fuels, but it plays an integral role in the global fossil fuel system.

The reason these companies are all able to find their way into this ‘Fossil Fuel Free’ fund is due to the screening criteria used.

PensionBee’s Fossil Fuel Free plan excludes companies on the basis of the FTSE Russell’s criteria, which excludes companies that:

  • Are classified as in the following sub-sectors (defined according to the Industry Classification Benchmark) – Exploration & Production, Integrated Oil & Gas, Coal Mining and General Mining; and either
  • Have revenues arising from Bituminous Coal and Lignite Surface Mining, Bituminous Coal Underground Mining, Anthracite Mining, Crude Petroleum and Natural Gas, or Natural Gas Liquids: or       
  • Proved and probable reserves in coal, oil or gas based on the companies’ published annual report and accounts.

It is important to emphasise that the FTSE Russell index does not exclude companies that provide services to the fossil fuel industry, use fossil fuels, or finance exploration. It is therefore a rather narrow definition of ‘fossil fuel free.’

Baseline screening

It is common practice for pension providers to offer a wide range of funds, ethical and non-ethical. Ethical Consumer expects a pension provider to have ethical policies that apply to all its funds, which set out baseline requirements, such as excluding investments in the manufacturer of cluster munitions and other ‘controversial’ weapons.

PensionBee told Ethical Consumer that it applied ‘baseline screens to all plans, unless there is reason why that would not be possible, such as investing in cash or in line with Sharia principles.’ While it disclosed these baseline screens to Ethical Consumer upon request, these are not publicly available for consumers to view.

bullets lined up in V shape

Investing in arms and other questionable sectors

The fund states that it prohibits investment in manufacturers of controversial weapons, but it had several holdings in 'defence' companies, including a stake in BAE systems. Although these companies may not produce weapons that are technically classified as ‘controversial’, most people would probably agree that investing in any defence company is, at the very least, controversial. 

BAE Systems, for example, is the fourth largest arms producer in the world and sells its products to authoritarian regimes such as Saudi-Arabia. It is also involved in the research, development, and managing nuclear- and autonomous weapons.

There were also holdings across other ethically questionable sectors:

Fund transparency

At Ethical Consumer we believe consumers have a right to know where their money is invested, so investment and pension funds should disclose their holdings, at least on an annual basis. 

The Fossil Fuel Free Plan’s top ten largest holdings were disclosed on the Legal & General website, as is standard practice, but a full list of holdings was not publicly disclosed.

Upon request, PensionBee sent Ethical Consumer a complete list of the shareholdings for its Fossil Fuel Free Plan, which comprised 961 holdings across a range of sectors.

More on the fund

PensionBee stated that its Fossil Fuel Free Plan was created following a survey of its customers which found that over a third expressed a desire for fossil fuels to be excluded from their pensions, even if that meant a potential reduction in profitability.

The fund, which is actually managed by Legal & General, tracks a newly-created index, the ‘FTSE All-World Transition ex Fossil Fuel ex Tobacco ex Controversies Index’, which passively tracks (without an active fund manager) companies that are in line with the Paris Agreement on climate change. It was designed in collaboration with the Transition Pathway Initiative, FTSE Russell, and the Church of England. The PensionBee platform is the only place that individual consumers can invest their money in this fund.

PensionBee response

We contacted PensionBee for comment and they gave the following response:

PensionBee was one of the first pension companies to offer mainstream responsible investment options for consumers. 

"Our campaign to launch the more climate conscious Fossil Fuel Free plan followed requests from our customers who wanted to save for their future while excluding those companies with proven or probable reserves in oil, gas or coal. 

"Private pension savers would otherwise have to find a specialist active manager, usually at significant cost, to invest their pensions in an environmentally conscious way. 

"We believe our customers deserve good pensions and that they have the right to choose how they invest in their retirement. Our website clearly outlines what our plans do and do not exclude. 

"PensionBee is an open, customer-led company so of course if our customers were significantly interested in alternative options we would seek to explore this further."