How can we use the £3 trillion invested in pensions in the UK create a world that we want to live in, asks Make My Money Matter’s David Hayman?
Across the world, we’re seeing an explosion of activism of key issues – from MeToo on gender and Black Lives Matter on race to Fridays for the Future on climate change.
People are no longer waiting on politicians to change the world for them – they’re taking matters into their own hands and asking ‘what can I actually do to make a difference with my everyday actions?’
And they’re finding that answer in unexpected places.
They’re finding it in the clothes they wear, the food they eat, and how they travel. They’re discovering it in the products they buy, the brands they engage with, and the employers they work for.
And the next big revelation is that they’re finding it in the places they put their money. Because – unbeknownst to the majority of us – through our savings, our investments and our pensions, we have likely become accidental investors in the practices we avoid, and the causes we fight against.
That’s why we believe that making your money matter will prove to be one of the most exciting – and powerful – steps which individuals take over the coming years to build a better world.
Let’s take a look at why our money matters so much.
There’s £3 trillion invested in UK pensions alone, and that’s money owned by all of us. That’s more than enough to help deliver the Paris Climate Goals, support research and development into new vaccines, or fund critical green infrastructure across the country.
But while investing in many vital businesses, UK pension funds have also been fueling some of the most unsustainable and exploitative industries on the planet. From tobacco to fossil fuels, weaponry to gambling, pension funds have invested trillions on our behalf without ever asking us the crucial question – do these investments create a world that we actually want to live in?
Why is it that the UK’s three and a half million vegans are accidental investors in factory farming? How can it be that the pensions of scientists researching cancer treatments help fund the tobacco industry? And why is it that the pensions of our most sustainable businesses and our greenest MPs contribute to coal mining, oil extraction and deforestation?
In the short term, our money is contradicting our values. But more worryingly, in the long term, it may be undermining the viability of the very futures we’re saving for.
At Make My Money Matter we believe this dichotomy cannot continue.
For purpose-led business, this is critically important.
As organisations take important steps to reduce their carbon footprint, increase their impact and deepen their connection to society, it’s likely that a fundamental contradiction exists between these practices and the impact of their money.
Private sector company pensions schemes totalled more than £1,800 billion last year. This is a staggering amount of money, particularly when contrasted with the sustainability or CSR budgets of many organisations. Yet only a fraction of these companies align their corporate sustainability activities (such as emission reduction targets) with their pension fund contributions. This despite the fact that switching a company pension fund into more sustainable investment could make a significant contribution to cutting emissions and tackling social issues.
Even many leading, purpose-led companies – which do brilliant day-to-day work on sustainability – fall into this trap. A lack of knowledge on sustainable investing, limited awareness of the power of our pensions and the mistaken belief that responsible investing produces lower returns (over a decade’s worth of evidence suggests that there doesn’t have to be a trade-off between value and values) undoes the great work they do elsewhere.
This represents a multi-billion-pound gap – with corporate sustainability commitments on one hand, and the often-contradictory impacts of their pension contributions (which routinely invest in deforestation, tobacco and fossil fuels) on the other. This gap poses financial risks to companies, brand concerns for their consumers, and authenticity challenges amongst increasingly value driven employees.
Because, the flip side to this challenge is great opportunity.
Companies and their employees invest up to £20bn through pensions each year – money which could be directed toward clean energy, affordable housing, medical research and green infrastructure. Investments which could be set up to align with your corporate values, priorities and aspirations for the world. The potential for achieving positive impact by aligning pensions with values is huge, and should be ignored no more.
And it doesn’t have to mean lower returns either – the ethical fund of Nest, the UK’s largest pension provider, has been its highest performing fund over the past five years, showing us where the real value lies.
When companies align their pensions with their values, they do more than just support their employees’ saving for the futures, they help build a world fit for their retirement.
That’s why Make My Money Matter wants all organisations to align their pensions with their values. To do this, we’re calling on businesses to join our campaign by committing to:
At this critical moment, where the decisions we take will shape our lives for decades to come, our money matters more than ever. Do we continue to invest against our values, and fund the dying industries of the past. Or do we commit to building a better future? After all, what’s the point of saving for retirement in a world on fire?
If all companies align their pension schemes with their values, we could ensure the billions invested through corporate pensions each year help build a better world. Make sure you have a pension to be proud of.
David Hayman is Campaign Director at Make My Money Matter – a people-powered campaign fighting for a world where we we all know where our money goes, and where we can demand it’s invested to build a better future.
Photography by rupixen.com