A guide to ethical pensions

If you want to be a more ethical consumer, picking more green investments (aka socially responsible investing) for your pension is a good place to start.

Socially responsible investing is an approach to investing (having a pension means you’re investing – see more below) that contributes to more positive social outcomes. For example, instead of your pension investing in coal, gas and oil, it would invest in green energy or clean technology.

How to decide what is socially responsible investing?

There are two ways of looking at this, the first is to look at the way companies operate and their practices. Some of the things you could look at:

  • Does the company have high employee welfare standards?
  • Does the company have ethical supply chain partners?
  • Does the company have positive environmental practices?
  • Does the company have high consumer protection standards?

You can also exclude any companies automatically based on the specific industry they operate in. These may include industries such as:

  • Gambling
  • Firearms
  • Tobacco
  • Alcohol
  • Fossil Fuels
  • Adult Industries

So what companies should you choose to invest in? Socially responsible investing means committing to companies that are working towards furthering society in a responsible way. These types of companies might include:

  • Environmental sustainability 
  • Social justice 
  • Education
  • Accessible healthcare

Go Green on pensions

Not all of us will have funds to invest more generally but thanks to auto-enrolment nearly everyone employed in the UK should have a workplace pension scheme.

This allows employees to benefit from tax-free investing and top-up contributions from their employer – and try to invest in a greener future. More than 95% of those with company pensions remain in their companies default scheme, many of which contain investments in the big energy firms, tobacco and arms.

However, things are changing.

Richard Curtis, film director and founding Comic Relief campaigner set up Make My Money Matter, a national campaign that urged everyone to put their pension into investments that address climate change.

Since then lots of good things have happened. Nest, a UK pension provider, announced it will actively stop investing in carbon-heavy investments.

Green pension providers and plans

There are a few simple steps you can take to make sure you’re comfortable with where your money is going.

1. Find out what your company pension is invested in and what ethical or green alternatives are available 

2. If your workplace pension doesn’t provide an ethical alternative you could work with your colleagues to ask HR to review your provider to include a green or ethical option

3. If you have an old company pension that you no longer contribute to because you moved jobs you could consider consolidating them into a SIPP (self-invested personal pension). 
If you have a SIPP it’s relatively easy to go green with your pension investments and you might even be able to directly invest in companies you believe are making a difference to the world.

Top tip: PensionBee launched the UKs specifically green option last year. Their Fossil Fuel Free Plan completely excludes fossil fuel producers, tobacco companies, arms manufacturers and persistent violators of the UN Global Compact.