The majority (85 per cent) of UK pension providers are thought to have “inadequate” or “poor” climate action plans in place, according to research from Make My Money Matter (MMMM), developed in collaboration with Profundo.

The research, which looked to rank the top 20 defined contribution (DC) workplace pension providers on their climate action, shed light on a number of key failings in pension providers’ climate plans, which could have "worrying results" for people and planet.

Whilst almost all pension providers had set net-zero targets, the report found that there were “significant failings” in their detailed climate plans, with no provider deemed to be taking a leadership role on climate action.

On average, providers scored 3.2 out of 10, which MMMM highlighted as demonstration that despite pockets of progress, the majority are failing to implement ambitious, science-based climate plans.

Indeed, 13 providers, including Standard Life, Now Pensions, Royal London and Lifesight, were found to have 'inadequate' climate action plans, while four organisations, Hargreaves Lansdown, SEI, The People’s Pension and Mercer, were awarded the lowest ranking with a 'poor' climate action plan.

Of the 20 providers in the report, Aviva, Legal & General and Nest were the only providers found to have adequate plans in place.

In particular, the report identified two areas of climate action where progress has been “woefully inadequate”, as eight out of the 20 providers in the study scored 0/10 on policies related to coal, oil and gas, while all 20 were found to have poor or inadequate plans on deforestation and land use.

In light of the findings, MMMM urged pension providers to end finance for fossil fuel expansion, tackle deforestation in their portfolios, and urgently scale up investments in climate solutions.

It also warned that further inadequate action risks alienating pension holders who expect leadership from their provider and could threaten long-term financial returns as schemes fail to sufficiently address climate risk.

MMMM co-founder, Richard Curtis, said: "Climate leadership is not just important for the planet – it's popular too. But the fact that 17 of the UK’s top 20 providers have inadequate or poor climate plans tells you all you need to know about how seriously the industry is taking this issue.

“The public will rightly be worried about these results, and we hope this ranking acts as an urgent wake up call for the pensions industry to up its game on climate change. In doing so they can help protect the planet and provide savers with pensions they can be proud of.”

MMMM CEO, Tony Burdon, added: “In a year where an average temperature rise of 1.5 c was exceeded for the first time, this report should concern everyone who cares about their pensions, or the planet.

While there are pockets of progress which indicate what funds could achieve if they showed energy and ambition, overall leadership is scarce and progress slow. That’s why we now need all pension providers to recognise the findings of this report and invest in the skills and capacity needed to meet the climate crisis.”

However, whilst industry organisations have welcomed the report's call for action, a number of those included in the rankings have since suggested that the research may not be reflective of the ongoing work underway within the industry.

A spokesperson from People’s Partnership, provider of The People’s Pension, said: “While we support MMMM in its efforts to push for real change in the industry, addressing climate risks and opportunities is incredibly complicated and nuanced, with many different viable ways to address them.

“The People’s Pension remains committed to aligning its portfolio to 1.5 degrees and we have been working hard on the issue for a long time to find the right solutions for our 6.5 million members to ensure we deliver value.

“We will be making an announcement about long-planned changes to the approach in the near future.”

Adding to this, a spokesperson for Lifesight, said: “LifeSight is publicly committed to reducing its emissions by 50% by 2030 and reaching net zero by 2050.

"We have taken significant measures from the beginning to reach this goal and this is reflected in the positive short term progress we have made in line with our Carbon Journey Plan.

“Our targets have been set in line with IIGCC NZIF and reference the pathways set out in the IPCC Special Report on 1.5°C.

"We have expanded our stewardship resources in order to push for outcomes aligned to the Paris agreement via additional channels and we do not rely on carbon offsetting in order to achieve our goals.

"In December 2023, LifeSight invested c£7bn of capital into an innovative new fund with which incorporates climate transition risk and has a decarbonisation pathway built into it. This fund will form part of the vast majority of member’s pensions further highlighting our focus on tangible action on climate change.

“We are disappointed that this progress has not been sufficiently reflected in the Climate Action Plan Research but we appreciate that the report is designed to encourage further, faster progress across the investment industry.

"This is a goal we share with the Make My Money Matter campaign and we will continue to drive progress towards our net zero targets.”

A spokesperson for Mercer also added: "Mercer receives numerous requests to participate in surveys, which often ask for varied and divergent information on its activities and as such, Mercer does not respond to all the survey requests it receives.

"Mercer appreciates that in this case its policy has resulted in an overall rating that is unreflective of its underlying activities. For more than 20 years Mercer has been at the forefront of sustainable investment research and is proud of the work it does with its clients."

Hargreaves Lansdown also clarified that despite its ranking as in the report, it is a self-invested personal pension provider, not DC provider.

"Nevertheless, we take our role in managing and mitigating climate and deforestation risk across our investment solutions seriously," Hargreaves Lansdown head of communications, Danny Cox, said.

"We are due to publish our financed emission net zero strategy in 2024, which will provide more detail on how we manage these risks as well as greater transparency on where our emissions sit (broken down by sector and asset classes).

"We will be taking part in the initial trial of the ForestIQ data and we’re confident this will unlock our abilities to understand our exposure to deforestation and subsequently set targets to move towards deforestation free portfolios."

Now Pensions head of DC pension design, Stefan Lundbergh, added: “As a business we are taking positive steps on sustainability, such as increasing the number of investments in our portfolio with explicit sustainable objectives from 56 per cent to 82 per cent in 2023.

"Climate change is among the core sustainability issues which inform Now: Pensions’ investment strategy. Our three priority sustainability issues are climate action, gender equality and living wages.

“Now: Pensions also continues to promote an active stewardship role, implementing a standalone stewardship policy in 2023 which helps to ensure the responsible oversight of the companies it invests in.

"We actively engage with companies to support – and if necessary, require – them to transition to a lower-carbon business model.

“Throughout 2024 we will also be announcing a series of developments to our proposition, of which our sustainability commitments will play an important role. We look forward to sharing more with our members in due course.”

Also commenting on the research, Standard Life managing director workplace, Gail Izat, said: "We welcome the report from MMMM campaigners, and we agree that our industry has an important role to play in the journey to net zero. As an asset owner, we have set a target to reach net zero by 2050, and to achieve a 50 per cent reduction in carbon emissions by 2030.

"Our climate ambition is to manage investment risk and optimise value for our customers and play a key role in delivering a net-zero economy and to get there, we are working with key stakeholders.

"We have been transparent about our strategy and progress, in our net-zero transition plan, in order to ensure a managed and sensible approach, and we are proud of the progress we've made so far to deliver on our sustainability plans.

"The report has a particular emphasis on special interest areas of deforestation and fossil fuels. Last year we published our first net zero transition plan which sets out our broad range of actions being undertaken, including - transitioning 1.5 million members and £15bn of assets to our sustainable solutions, establishing an inhouse stewardship team to engage with companies to drive progress towards net zero and using our exclusion policy to limit investment in particular sectors that include tobacco, nuclear weapons, controversial oil and gas and thermal coal. In addition, we are using our voice to drive wider system change needed to achieve net zero.

"We continue to actively engage with government, regulators and industry climate change initiatives and have committed to a number of global initiatives and working groups while publishing detailed commitments and measures, and like our peers across the industry, we know there is more to do."

Royal London and SEI have been contacted by Pensions Age for comment.

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