Responsible investment

Our £15bn move into climate-aware investments is helping to combat climate change through protecting your employees’ savings against its worst financial risks.

A climate-aware investment strategy

Moving £15bn of our investments into climate-aware strategies – the biggest single move of its kind in the UK for a master trust pension scheme – is part of our long-term strategy to combat climate change through protecting your employees’ pension savings against its worst financial risks.

At The People’s Pension, we understand the importance of providing your employees with a pension scheme that not only aims to secure their financial future, but also aligns with their values. Our members have told us that climate change and protecting the environment matters to them, so we have made these issues priorities within our Responsible Investment Policy.

“Key to our investment philosophy is conviction in what we do – if we really believe in something, we want to make it core to our members’ retirement savings, rather than a tick to a box, and that’s what we’ve done here.” Key to our investment philosophy is conviction in what we do – if we really believe in something, we want to make it core to our members’ retirement savings, rather than a tick to a box, and that’s what we’ve done here. Dan MikulskisChief Investment Officer

In February 2024, we moved about £15bn (60% of our total investments) into ‘climate-aware index’ funds that will reduce their carbon intensity (how much carbon dioxide is produced per million pounds invested) by 30% and aim to reduce this by 7% per year in the future.

Our size and scale drive positive change

Our size and scale as one of the largest independent master trust pension schemes in the UK – 6m+ members and 100,000+ employer accounts – mean our pension investments can really drive positive change to the things that matter to you and your staff.

We’re responsible for looking after billions of assets under management (our members’ money) that are invested in global companies equities and bonds, which provides us with stakeholder voting rights in some of the world’s largest businesses. This gives us the power and influence to make companies change their behaviour and target more sustainable business practices, that align with our values and those of our members.

By moving £15bn of our investments into climate-aware strategies, we’re helping lead the fight against climate change. We believe that climate change is not only an existential risk to nature and humanity, but it is also a risk to future pension returns. This move means:

70% of our main investment fund (Global Investments (up to 85% shares) Fund) will now be clearly aligned to the Paris Agreement goal of keeping global warming below 1.5°C.
The carbon footprint of the members invested in this fund has been reduced by 30%.
Our investment costs have reduced, which, as a ‘profit for people’ organisation, means more to invest in improved products and services, that benefit members.

A long-term plan

Moving our members’ savings to more sustainable assets now will help us mitigate the worst financially material risks of climate change, as companies involved in carbon-heavy industries, will likely see growth curtailed as the world moves to more sustainable low-carbon initiatives and technologies.

By proactively moving our investments, we aim to reduce the material risks of climate change negatively affecting our members’ pension pots, including:

Physical risks – severe weather (flooding, droughts, and storms) that has the potential to affect the economy.
Transition risks – specific sectors of the economy may face shifts in the value of their assets as new greener technology supplants carbon-heavy industries (eg, the petroleum sector).
Liability risks – businesses and municipalities may face lawsuits if they fail to adequately prepare for climate risks.

The new investment strategy is designed to deliver even better investment returns for savers.

A financial-first approach to responsible investment

This isn’t just a defensive measure to protect your employees’ pension savings. We take a financial-first approach to responsible investments, which means the primary objective of moving a large portion of our investments to climate-aware strategies, is to target improved financial value to our members’ savings through our portfolio construction and stewardship approaches.

Nor does it mean we’re solely investing money into windmills and electric cars. We’re trying to mitigate risks, but it’s not a rush to solely invest in green companies. We think that by investing in climate-aware strategies, the risk to our members’ money and investment returns will be reduced.

A greener ‘default’ fund

Our ‘default’ investment – the ‘balanced’ investment profile – where the majority of our members’ money is placed when they join the Scheme if they don’t want to make investment decisions for themselves, is central to our responsible investment approach. We know our members care about climate change and the environment, so we wanted to make our ‘default’ investment option as green as possible.

The change means the carbon footprint for the majority of our members invested in the ‘default’ has reduced and our investment in companies that produce thermal coal for the assets covered by the new strategy has been removed.

Encouraging member pension engagement

We’re confident that moving £15bn of our assets into climate-aware investment solutions will encourage greater engagement from your employees with their pensions. Our sustainable investment approach means that their voices are magnified, and the environmental, social and governance (ESG) issues that are important to them, will be reflected in our proactive portfolio investment strategies.