Walk more, cycle more, eat less meat...

These are all the typical solutions provided by the majority to reduce our impact on the environment. And yes, this includes me... However, to caveat this, I believe in community, small change and working towards that 1% each day which is what these small habits like walking more are. They are not the silver bullet, but like choosing reusables, they are that 'pat on the back' to say 'I'm trying to do my part'.

When it comes to the bigger picture though, as always - money talks - and and if you're in the position to open, or lucky enough to have a pension pot built up over the years, by managing this more efficiently - you are really in the position to make real change as Banks and Pensions assist climate change in several ways.

In switching to a sustainable pension, it could be up to 21 times more powerful in the fight against climate change than giving up flying, becoming vegetarian and choosing a renewable energy supplier combined. (Euro news & Make my Money Matter, 2022).

Shaping the Financial Ecosystem

Pensions and banks can impact climate change in several ways. First, pensions and banks play a significant role in the global financial system, and have the ability to influence and shape the allocation of financial resources. This includes the allocation of funds to different industries and sectors, such as the fossil fuel industry, which is a major contributor to greenhouse gas emissions and climate change which continuously receives tax breaks due to lobbying efforts.

With nearly £3 trillion is invested in pensions in the UK, you can imagine that by ensuring as much of this sum as possible goes towards Net-Zero & Renewables as possible, could make a huge difference.

Where money flows...

Pensions and banks can also impact climate change through their investment decisions. Many pensions and banks invest in a range of assets, including stocks, bonds, and real estate. These investments can have both have direct and indirect impacts on the environment, and can contribute to climate change if they are not managed in a sustainable manner ranging from deforestation to the release of additional fossil fuels into the atmosphere.

However, according to LLoyds Banking Group, more than half of adults in the UK indicate a preference that their pensions help tackle climate change, yet only 15% currently invest theirs responsibly.

Policies and Practices

Pensions and banks can also impact climate change through the policies and practices they adopt. This includes the development and implementation of policies and guidelines that support sustainability and mitigate the impacts of climate change, as well as by helping consumers understand the benefits of ESG-related pensions and assist with the change of plans.

Awareness is key and should be a strategic focus for banks in the future with only 25% of employers claim to be knowledgeable about green pensions – while 27% of employers have never heard of them. (LLoyds Banking Group)

Less than 10% of FTSE100 companies include pensions within their public sustainability strategies. Most worryingly though, it seems that many business leaders are failing to understand the issue, with only 45% of CEOs and leaders acknowledging that their company pension scheme could drive climate change.

In Summary

Pensions and banks have the potential to play a significant role in addressing climate change, both through the allocation of financial resources and the policies and practices they adopt and by integrating sustainability into their operations, investment decisions and  to accelerate the transition to a more sustainable and equitable society.

For those with an average size pension pot (£30,000 or €34,415 in the UK) transitioning to a sustainable option could save as much as 19 tonnes of carbon a year. Where as, if you have at least £100,000 (€114,718), a greener pension might cut as much as 64 tonnes of emissions every year - that’s nine years worth of the average UK citizen’s carbon footprint. (Euronews & Make my Money Matter, 2022)

What Can You Do!

1) Invest in Green / ESG Pensions that positively impact renewables, energy, agriculture or green-construction
2) Divest current holdings in Fossil-fuel related corporates (Coal, Oil & Gas)
3) Learn & Raise awareness (In a nice way, please not like those in XR)

The exact percentage of emissions reduction that can be achieved through changing your pension will depend on the specific actions you take and the extent to which your pension is currently invested in emissions-intensive industries. 

However, even small changes to your pension can make a difference, and can help to support the transition to a more sustainable and equitable society.

If you found this helpful, please let me know :)

All the best,
Cathal O'Reilly, ACA

Written by Cathal O Reilly

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