Is your pension green? Warning as companies try to trick Britons through ‘greenwashing’

Martin Lewis advises pensioner on savings accounts

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Pension funds are responsible for financing an average of 23 tons of CO2 emissions every year through the companies they invest in, according to Cushon, a net zero pension provider. Some 85 percent of pension holders do not know how and where their pension is invested, according to a survey by NerdWallet, with over a third of respondents saying they want their workplace or personal pension provider to be more transparent about the businesses their funds are invested in.

A potential way to invest in more ethical pensions is to look for ESG funds. These are funds where the underlying investments have met specific criteria for environmental, social and governance standards.

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Investing in a greener pension could be 21 times more powerful at reducing one’s carbon footprint than giving up flying, eating less meat and switching energy provider combined, according to research by Make My Money Matter.

However, people must be aware that not all companies will be as ethical as they claim to be, which could confuse matters as Britons attempt to invest their pension in greener funds.

With the world becoming more conscious of environmental issues, it has become fashionable for businesses to trumpet their own achievements in going green.

But some of these companies may not be telling the full story, and may in fact be “greenwashing”.

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Greenwashing is when a company gives the impression that their products or services are more environmentally friendly than they actually are.

It is normally done by simply exaggerating the truth with regard to any claims of being an environmentally friendly business.

This could mislead people into giving these businesses their custom, as they believe doing so is better for the environment than it really is.

As companies become more cognisant of the wants of consumers with regard to more ethical and green practices, there is more risk of people being caught out by businesses claiming to be doing more than they really are.

Steven Cameron, Pensions Director at Aegon gave his thoughts on the landscape of ethical pension investing, as the Government attempts to making them more accessible as part of their commitment to the fight against climate change.

He said: “The Chancellor has confirmed he is taking forward previous ideas to grant pension funds, including the fast-growing defined contribution sector, more flexibility to invest more on behalf of members, in ways that support economic recovery and help the UK go greener.

“This includes in infrastructure, ‘illiquid’ investments, innovative start-up companies and the ‘green revolution’. 

“Those running pension schemes must always act in the best interests of their members, but will increasingly take an interest in these types of investment and the potential investment returns they could deliver.

“Removing any regulatory barriers to doing so is to be welcomed.

“Many people will want to do their bit to help the UK’s economic recovery. The Chancellor’s new NS&I Retail Savings Product linked to Sovereign Green Bonds will offer a new and very specific way of doing this.

“Alongside moves to encourage pension schemes to invest in certain areas, this new savings product will generate a source of money from individual investors who will be keen to know what interest rate is on offer, although they’ll have to wait till the summer to find out rates.

“However, unlike pension funds these will not be stocks and shares investments and individuals might be keen to explore alternatives through specific pension and ISA fund choices.

“As with any investment, it’s important to diversify and make sure you don’t have all your eggs in one basket. It’s also important to make sure you are making the most of tax incentives by investing in pensions and ISAs. Advisers will be able to help people navigate new options.”

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