Why your workplace pension might be holding you back

There are all sorts of things a business can do to operate more sustainably and manage their environmental impact. To name but a few, you could: 

• Switch to renewable energy and introduce efficiency policies

• Switch to zero-emission fleets and introduce travel policies

• Choose suppliers with environmental commitments

• Adopt circular economy principles to manage waste

• Develop a decarbonisation transition plan

But pensions need to be considered too 

They are often forgotten in this context, but the average pension pot of an employee in the UK finances 13 tonnes of CO2e per year. You’d need three Olympic swimming pools (with lids on) to hold that much gas. 

But not all pensions are the same and by changing to a more sustainable pension provider, you could be helping tackle climate change by making a significant dent in carbon emissions.  

The good news is that making your workplace pension more sustainable is far quicker and easier than adopting circular economy principles, for example.  

You could ask your current provider if they offer more sustainable investment alternatives or find another provider who offers one as standard.  What’s more, depending on your provider, it might not cost you a penny. And it could be one of the best decisions you make for your employees’ future finances. 

A climate-focused investment strategy is dual-purpose 

We firmly believe that aligning with future-proofed investments can really make a difference to employees’ pension pots. It’s about helping secure a better financial future for your employees while helping to build a more sustainable world for them to retire into. 

As climate change reshapes the global economy, it will create clear winners and losers. By investing in businesses that lead the transition to renewable energy, sustainable technologies, and responsible practices, we aim to capture growth opportunities while avoiding those companies that risk being left behind in industries that are no longer sustainable or competitive. It’s about building resilience to a world that is likely to change a lot as a result of climate change. 

The world is already moving in this direction. Just look at the UK. According to the Office for National Statistics, the UK emitted 160 tonnes of CO2e for every £1m of economic activity in 2023. It was 560 tonnes in 1990, when records began. That’s a 71% reduction in just over 30 years. Huge! Our direction of travel is hard to deny, and energy security and the low-carbon transition is still high on the Government’s agenda.  

And we haven’t even mentioned the engagement potential… 

Because of the assets they are invested in, more sustainable pensions are better at getting your employees engaged. They’re also what employees are asking for.

Our own research shows that 62% of employees would engage more with their pension if it was having a positive impact on the environment.

Who wouldn’t want to know their savings are invested in a cutting-edge wind farm, generating tonnes of green energy every day? Or to a low carbon pepper farm that’s powered by wasted heat energy and sells its produce at the local shop? It’s relevant, it’s relatable, and it has a real impact at the same time as growing their money, which can create an emotional connection that keeps them engaged.

And when you improve engagement with your pension, you set employees on a journey to make better choices about their money and build their financial confidence. They may even appreciate you more for your contributions and support.

In other words, sustainable pension investments can unlock better value for your business and better outcomes for your people. And in 2025, it’s never been more important to make sure your most expensive benefit adds value.

Article by

Steve Watson, Director of Policy & Research