Ethical Pensions Might Save the Planet
By: Jenni Elbourne
Tags: Politics, Better World, Pensions, Investing, Environment

Ethical Pensions Might Save the Planet

But can we afford the risk?

Would you put your retirement savings into green energy? Photo by Aniek Wessel on Unsplash.

My pension pot is embarrassingly, terrifyingly small. Aside from a stint of 3 years working part-time in the NHS, I’ve been self-employed for my whole career. Without an employer to match what I put in, the options for saving for retirement are pretty dire, and there’s always been a reason not to. First I was simply too poor (I work in the arts — you get the idea). Then I was saving for a property… then I realized I was 32 and if I didn’t get started soon, I was going to be hoping I don’t live long enough to regret it.

The numbers we’re talking about here are tiny; but doing something seemed infinitely better than doing nothing. So I conducted some research and decided to open a Self-Investment Personal Pension, or SIPP. I chose a company whose SIPP was consistently highly rated in consumer surveys, and unlike some of the other options, there were no setup fees; just a yearly admin fee which is a % of the money that I invest (and it turns out 0.45% of barely anything is… barely anything. Hoorah).

Most of us don’t understand investment, and that makes it scary

A key feature of SIPPs is that you are officially responsible for your own investment decisions. As someone who has no experience of investing, it came as a relief to me that my chosen provider offered some ‘managed portfolios’ where you choose a level of risk (high, medium or low) and are presented with a corresponding investment package, as opposed to… well, I genuinely don’t know how else I could have chosen from the thousands of investment options that all looked like Double Dutch to me. I went with medium risk for medium returns, and forgot all about it.

What’s the point in green living if we’re pumping pension money into the very industries that threaten our existence?

Then, 2019 arrived. Extinction Rebellion. Climate emergency. I read Doughnut Economics. I started trialing a wide array of plastic-free shampoo bars, and sporting varying greasy hairstyles to match. I began to wonder, does anything I can do to save the planet really matter, if my monthly pension contribution is being invested in fossil fuels?

Extinction Rebellion protest. Photo by Kevin Grieve on Unsplash.

I put out a call on Twitter for some advice. I was pointed to places like Triodos and Purposeful Money. I looked into these and some other options, but none seemed very appealing when considering setup fees, likely returns, and customer service (I had at least one provider not respond at all to my request for a phone call. Having divulged some rough numbers in my email to them, I couldn’t help but feel a bit offended that they presumably thought I wasn’t worth the effort).

‘Ethical’ isn’t as straightforward as it sounds…

I did some reading around and learned a bit more about what the different types of ‘ethical’ pension available. It hadn’t really occurred to me that ‘ethical’ is a subjective term, depending on your ethics. It would take me forever to properly understand the practices of all the entities that my pension might be invested in, and to judge whether or not they meet my definition of ‘ethical.’

Instead, I learned, it is possible to select managed funds that work on the principle of exclusion: i.e, they avoid investing money in any company actively involved in specific areas such as weapons, tobacco or fossil fuels. And it turns out my existing provider has one such fund that is also recommended for its track record in terms of risk and returns. Just the one, mind. Presumably meaning that the hundreds of other fund options in front of me do not meet this minimum, unambitious threshold for the ‘ethical’ label. As depressing as this is, it strengthened my resolve to start shifting the focus of my investment. I moved the money that was being held as cash on my account to the ‘Ethical’ investment fund.

… but we don’t want to be the people who sat back and watched as the planet destroyed itself. Do we?

What about the rest of my pension, that’s already been invested in the ‘medium risk, medium rewards, probably unethical to some degree’ fund? I’m still thinking about what to do with that. I’d quite like somebody who understands the stock market better than me to just come out with it and say “nobody knows what’s going to happen to any of our investments. Ethical funds aren’t inherently risky by virtue of being ethical. Go for it.” Until then, I’m still torn between the fear of losing my retirement fund to a dodgy investment, and the fear of losing everyone’s retirement to the global extinction that might happen if we don’t put our money where our mouths are.