Green your Workplace Pension

Disclaimer: This is not financial advice.

Many of us are unknowingly funding climate change through our pensions. Most default workplace pensions invest in fossil fuels and other environmentally harmful industries. In the UK, pension funds hold an estimated £88 billion in fossil fuel investments, making up around 3% of total pension assets.

By funding fossil fuel companies, we are indirectly supporting the continued extraction and burning of oil, gas, and coal - the primary drivers of global warming, air pollution, and environmental degradation.

Here are some actions you can take.

1. Switch to an Ethical Fund Within Your Current Pension

Most providers offer an “ethical” or “ESG” (Environmental, Social, and Governance) fund. These typically reduce exposure to fossil fuels, arms, tobacco, and other harmful industries. Moving your pension is often just a few clicks — and can send a strong signal to providers that demand for greener investments is growing.

This isn’t just about values. It may also be a smart financial move:

• Fossil fuels are underperforming: According to a 2024 IEEFA report, fossil fuel stocks returned just 5.7% in 2024, compared to the S&P 500’s 25%. This trend has persisted for over a decade.

• Stranded assets: Oil and gas reserves are becoming unviable as governments ramp up climate regulation.

• Market share is shrinking: Fossil fuels made up 30% of the S&P 500 in 1980, but now sit at just 3.2%.

Switching to a sustainable fund can help protect your pension from future volatility and align your money with a low-carbon economy.

Check your provider’s website or call them to explore their ethical fund options. Many let you switch online in under 10 minutes.

2. Encourage Your Workplace to Offer a Greener Default Fund

Most employees are automatically enrolled into the default pension fund, which often includes fossil fuel investments. However, employers can choose a different default, including an ethical or sustainable option.

Employers are allowed to set an ethical fund as the default for new joiners. Most just don't, either from lack of awareness or because they stick with what was originally set up.

This matters because the vast majority of employees never think to change their pension settings. In fact, 80% of UK pension holders have never considered that their monthly contributions might be accelerating global warming. When asked, however, 68% said they want their savings to help fight climate change.

Speak to your HR or benefits team. Ask whether your workplace pension’s default fund aligns with your organisation’s sustainability values.

Here’s a message you can send:

Subject: Request to Review Our Workplace Pension’s Default Fund

Dear [HR or Benefits Manager's Name],

I’m reaching out to ask whether our workplace pension’s default fund aligns with our organisation’s sustainability goals. Most employees are automatically enrolled into the default option, and recent data shows that 80% of people are unaware their pensions may be funding fossil fuels.

However, 68% of people say they want their savings to help fight climate change. I believe that by exploring a greener default pension fund, we could better reflect our company’s values and support a growing concern among employees.

Could we review the current default fund and consider switching to a more ethical or climate-aligned option? I’d be happy to support the process or join any internal discussion.

Thank you for considering this,
[Your Name]

3. Ask Your Pension Provider to Default to Ethical Funds and Divest from Fossil Fuels

Even if you have moved your personal pension, your provider may still be investing billions in fossil fuels across other portfolios, including the default funds used by most workplaces.

A meaningful first step they can take is to make their ethical or sustainable fund the default option for workplace pensions. Most people stay in the default fund, so this would have a wide-reaching impact.

From there, providers should move towards full divestment from fossil fuel companies. These assets carry long-term financial risks, especially as the global economy shifts to cleaner energy sources.

Here’s a message you can send:

Subject: Request for Ethical Default Fund and Fossil Fuel Divestment

Dear [Pension Provider’s Name],

I’m writing to encourage you to make your ethical or sustainable fund the default option for all workplace pension schemes. Most members are automatically enrolled into the default fund and never change it, so setting an ethical default is one of the most effective ways to reduce fossil fuel exposure at scale.

Recent research shows that 80% of UK pension holders have never considered that their monthly contributions might be accelerating global warming. However, 68% say they want their savings to help fight climate change. These figures clearly show that while awareness is still growing, the desire for more sustainable investment is already strong. By making the ethical fund the default, you can bridge that gap and help more people align their money with their values - even if they don't know to ask.

I also urge you to take the next step by fully divesting from fossil fuels across your broader portfolio. These investments carry long-term financial risks and are increasingly out of step with a decarbonising global economy.

Please let me know what steps you are taking to expand ethical options, update your default fund, and implement a full divestment strategy.

Sincerely,
[Your Name]

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