In a significant revelation regarding the impact of personal finance on climate change, a recent study highlights the power of switching to sustainable pensions. The study illustrates the personal agency people have to dramatically lower their carbon footprints through careful financial choices. This research was produced in partnership with the Make My Money Matter campaign, UK insurance company Aviva, and data analytics firm Route2.
Nick Robins is professor in practice for sustainable finance at the London School of Economics. He describes the work as “a very powerful piece of analysis.” These findings come with a thrilling opportunity. Making pension schemes sustainable might be up to 21 times more effective at fighting climate change than typical lifestyle changes such as banning yourself from flying, going vegetarian or switching to renewable energy suppliers.
The study precisely measured the carbon footprint generated by every £1,000 (€1,160) invested in regular and sustainable pensions. For an average pension pot of £30,000 (approximately €34,415), transitioning to a sustainable option could save as much as 19 tonnes of carbon annually. If you have a larger pension pot of £100,000 (€114,718) or more, you can be cutting emissions by an even more impressive 64 tonnes per year. That’s equivalent to nine years’ worth of carbon footprint for the average UK citizen!
The Role of Financial Institutions
Lloyds Banking Group made headlines in 2022 for announcing it would cease financing new oil and gas projects. This new study expands on that landmark ruling. This is an important decision as it continues the positive trend among financial institutions to adopt sustainability. Recent Biden Administration efforts demonstrate the importance of financial support in advancing environmental justice. For instance, a recently-approved near-€4 million loan to Avon Needs Trees will increase woodland creation across southern England.
Robins emphasizes the importance of these actions. He stated, “Shifting investment is an important way of sending signals to companies to accelerate action to support the net-zero transition.” This change is important because it drives businesses towards more sustainable practices.
Robins’ point is that we must do better to help people make smart climate decisions. This kind of awareness should pervade all areas of our lives, particularly in our financial stewardship. “The study points to the need for individuals to build up their capacity to make informed climate choices over all aspects of their lifestyle, not least finance,” he added.
Making Informed Choices
Richard Curtis, co-founder of the Make My Money Matter campaign, shared his concerns over public understanding of pensions. He said it was particularly important to know how they affect the environment. To him, the answer is clear when you look at “real collective steps in our society to become greener in our day-to-day lives,” he said. We founded Make My Money Matter when we discovered that our pensions could be sabotaging all our efforts. I didn’t want to just sit there as that was happening without trying to make people aware of it.
“Curtis expanded on the implications of the study’s findings. These findings confirm just how important our money is in the fight against climate change. In fact, our pensions are the most powerful weapon we have to help protect the planet,” he stated.
He is a campaigner for widespread reform in the UK pensions industry. “We need the entire UK pensions industry to go green—making their default funds more sustainable so all savers can have a pension to be proud of,” Curtis insisted.
Collective Responsibility
The current discourse around sustainability reminds us that individual decisions reach beyond what we buy and how we spend our money. People, on the other hand, have the power to make change happen in our financial institutions. They have always had the power to demand investments that directly improve our environmental health.
Curtis added, “As individuals, we have a critical role to play in driving this change by showing providers that we want our money invested in a way that does good, not harm and so that we can retire into a world that isn’t on fire.”
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