The UK’s top 20 defined contribution (DC) workplace pension providers are “failing to keep pace” with action required on climate change, research conducted by Make My Money Matter (MMMM) has revealed.

The MMMM Climate Action Report November 2022 revealed that over half (60 per cent) of the pension providers surveyed have not published the 2025 emissions reduction targets needed to keep pace with the speed required.

In addition to this, it found that four of the top 20 providers have made commitments on eliminating deforestation from their portfolios.

None of the schemes surveyed had a policy to end fossil fuel expansion, which MMMM said was “undermining” schemes' claims that they are working as effective stewards and contradicting guidance from the International Energy Agency that new oil and gas developments are not needed.

MMMM also found that although many schemes say they engage with their portfolio companies and asset managers to drive the transition to net zero, only 10 providers have explicit climate voting polices that expect companies to align with global temperature goals.

It also found that four in five (80 per cent) schemes have not made public commitments on eliminating deforestation from their portfolios and half (50 per cent) do not have explicit voting polices aligned to achieving global temperature goals.

In light of the findings, MMMM has outlined a number of key recommendations for UK pension schemes, including publishing interim, short-term targets to deliver on goals, and eliminating deforestation from portfolios.

Pension scheme trustees were also encouraged to "rapidly" increase their investments in climate solutions, align with the science and support the end of fossil fuel expansion activity, and to use their power to engage with the high emitting companies within their portfolios.

MMMM co-founder, Richard Curtis, commented: “Now is the time for action on climate - words are not enough. Since 2020 pension providers have committed £1.3trn to net zero, and this is important progress: but now the time has come for them to move beyond targets and take real action for real world impact.

“That real progress is already falling dangerously behind. We hope this report highlights the clear gaps in the climate action of UK pension schemes and urges them to refocus for 2023; directing their immense power and potential to address the twin challenges of climate change and biodiversity loss.

“We need pensions with purpose - we need to make our money matter in building a better world.

"By putting the £3trn in UK pensions to work in service of the planet, and pivoting from climate commitments to real action, the pensions industry can maintain the momentum generated over the past 12 months, and make sure our money is building a world fit for our retirement. There is no point inheriting a pension in a world on fire”

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