Pension providers are continuing to fail to address their role in financing the climate and nature crisis, posing a 'serious risk' to the retirement of British savers, according to a report from Make My Money Matter (MMMM).

The ‘Climate Action’ study analysed the actions of leading pension providers on climate change and found that, given the severity of the climate and nature emergency, the pace and scale of progress fell short of what was needed.

The top score was 5.8/10, up 0.4 on last year, and the overall average for these 12 providers rose from 3.9 to 4.5, which MMMM argued was still "inadequate".

The crucial themes of fossil fuel phase-out, and deforestation and land use continued to score badly, with both below 3/10.

According to MMMM, there were also signs of lethargy amongst household names, such as Standard Life and Royal London, who MMMM found to be this year's worst performers.

However, responding to the report’s findings, Royal London said it remained committed to reducing emissions from its investment portfolio by 50 per cent by 2030, from a baseline of 2020, and to achieving net zero by 2050.

"These commitments are based on the expectation that governments and policymakers will deliver on their commitments to achieve the goals of the Paris Agreement," a spokesperson for Royal London stated.

"It would be quicker and easier to achieve those targets by divesting from high-emitting companies. While divesting may seem like a simple solution, this would mean that we are unable to influence change in those companies. We believe, therefore, in engaging with the highest-emitting companies in our portfolio to encourage and support positive real-world change."

MMMM also acknowledged that average scores rose across almost all themes compared to last year, and four of 12 providers now score five or above ('adequate'), compared to three providers the previous year, showing that some progress has been made.

Nest topped the rankings, with Smart Pension and Now: Pensions moving up into higher spots.

Aegon also made improvements, while progress by The Peoples' Pension meant that no providers scored overall red ('poor') this year.

However, analysis from MMMM suggested that the pensions industry could invest a staggering £1.2trn into renewable energy and climate solutions by 2035, growing the economy, tackling climate change, and future-proofing savings.

The report set out key actions that must be taken to achieve this, including setting ambitious goals, developing detailed targets, and phasing out fossil fuels.

The group also called on the government and regulators to step up by setting a mandatory requirement for credible 1.5 ̊C transition plans and to do more to unlock investments in climate solutions.

The report highlighted the upcoming Pensions Review as an opportunity for the government to ensure that smaller climate leaders are not consolidated into larger climate laggards.

The Pensions Regulator (TPR) climate and sustainability business lead, Mark Hill, said there was no doubt that climate change would impact the long-term performance of pension investments.

“Most pension schemes meet their legal duties, but our research shows many are only doing the minimum," he stated.

"People expect their money to be managed well and to receive the best value for their investments. We are challenging schemes to ensure they consider a broad range of material risks which could threaten their savers' retirements."

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