Making sure your pension is invested ethically is a key element in a properly sustainable lifestyle, and also ensures that you are not the unwitting part-owner of any particularly unethical companies.
The pension market carries huge weight. In April 2016 to March 2018, aggregate private pension wealth in Great Britain was £6.1 trillion, which represented 42% of all wealth in Great Britain. In the UK, 77% of employees were members of a workplace pension scheme in 2019, up from 47% in 2012, when the government’s automatic enrolment initiative came into force.
It is vital that we all, young to old, take an interest in our pension, and not just for the sake of our (hopefully) wiser and more wrinkled future selves.
The impact of having an ethical pension
For many of us, a pension plan will be the largest investment we hold.
As you pay money into your pension that money is being invested, and when it is invested in company shares (equities) you actually become a part-owner of that company. If your pension is not invested in an ethical fund you will likely be the part-owner of companies in a whole range of unethical sectors such as arms, tobacco, and fossil fuels.
Many are shocked by this realisation. One poignant example is Dr. Bronwyn King, an Australian oncologist, who gave a TED talk in 2017 in which she described the horror of finding out that while she spent her days trying to treat lung cancer patients, her pension fund was heavily invested in tobacco companies.
It is important not to frame our thinking around pensions as simply avoiding the negative consequences of investment. Moving your money to an ethical 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 ‘greening’ your savings such as your pension "could generate 27 times greater improvements in a personal carbon footprint than eating less meat, using public transport, reduc[ing] water use, and flying less".
There are problems with comparing carbon emissions across such different areas as consumption and investments, so such claims should be swallowed alongside a fist-full of salt. It should also be emphasised that statistics such as Nordea’s do not mean that moving your pension to a greener fund suddenly justifies biweekly flights to the Algarve. Reducing consumption is, of course, essential. The point is that, thus far, the importance of moving your investments has often been underappreciated.