Fossil Fuel Free Pensions

Fossil Fuels are dragging your pension down!

 

At the end of last year I finally managed to switch to a fossil fuel free pension.  The journey wasn't completely straightforward, but it was worth it and hopefully this will become a lot easier in the near future.

Why do this?

There's a bunch of things you can do to reduce your carbon footprint including giving up flying and eating less meat, and I recommend all of them.  But right at the top has to be to stop investing in fossil fuel companies.  A typical pension pot in the UK is around £88,000 of which - typically - 4% is invested in oil, gas, and coal.  That's three and half grand of your money going directly to the likes of ExxonMobil.  If you simply spent this much on tax free petrol it would buy you about 8.8 tons of fuel which would create about 29 tons of CO2, or about 5x the annual emissions of an average Brit.  But investing probably results in an order of magnitude more emissions$^\dagger$.

But it's worse than that!

Funding oil and gas exploration is pretty bad, given that the proven reserves already contain enough carbon to blow our 1.5C budget several times over.  But not all the money invested in these companies goes towards exploration.  Some is spent on PR, on lobbying governments, and on setting up shadow organizations to undermine the case for emissions reductions.  (In fact the very concept of Personal Carbon Footprint was created by a PR team working for BP, with the goal of shutting up campaigners calling for systemic change.) My personal bugbear is the hydrogen hype being turbocharged by oil and gas company money.  (They know transitioning to a hydrogen economy will take longer than direct electrification, and that it'll allow them to sell hydrogen made from methane on the vague promise that one day they'll get carbon capture and storage working!)

How did I switch?

My pensions were with Clerical Medical and Aegon, so I did the obvious thing and went online to look for their "fossil fuel free" options.  An hour later I was no wiser, and having lost the will to live, I gave up.  Returning to it a few months later I called both companies to ask for advice.  It took an average of 1 hour to get through to each one.   I didn't get much joy.  One even offered me an "Islamic" pension on the basis that it was ethical and I was interested in "ethical" right?  (And no, the "Islamic" pension was not fossil free.)  What I did get was a promise that they'd look into it and write to me.  About two weeks later I received a letter from each company telling me to go online and look at their offerings, with still no hint indicating whether or not a fossil fuel free pension was available.

Having exhausted that route I went online to look for alternative pension providers.  I found a few but I wasn't familiar with any of the names, and this being a big decision, decided to delay for a while.  Eventually I learned about PensionBee, which was yet to launch but which invested via Legal and General, so I decided to sign up.  They were looking for £100M of commitments before opening, which would require one or two other people aside from me.  But after just a few weeks they'd garnered the support needed and invited me to switch.  The process was mainly online and went quite smoothly apart from some general incompetence from Aegon, which I've come to expect.

What if you only care about the filthy lucre?

Around this time Mark Carney - the (now former) Governor of the Bank of England - was telling the world that most fossil fuels would need to remain in the ground and that investments would soon become "stranded assets".  I'm not an investment banker but it would seem logical that removing such investments from your portfolio cannot possibly harm it!  But, what if most fossil fuels don't stay in the ground?  Well, in that case you don't need to worry too much about your pension: worry instead about mass migration, water and food shortages, killer heatwaves, and the feasilibity of civilization continuing.  Pensions will be the last thing on my mind....

But this is really an act of defiance

It's got to happen.  We're acting unsustainably and the definition of unsustainable is that it can't carry on.  All we get to decide is in what manner and how quickly the change happens.  Moving your pension means taking money out of the destructive industries and into genuine solutions like renewable power and heat pumps and district heating.  It forces other investors to follow your lead creating a carbon-flight in the market.  And it stands up to vested interests who are trying to extract as much cash out of their oil and gas while they can, with the consequences tomorrow's problem.

Go on!  It's a pain in the arse but it's worth it.


FOOTNOTES

  • $\dagger$ Investors expect companies they invest in to grow their capital by at least the size of the investment.  In general, oil and gas companies' capitalization is proportional to the number of barrels they currently have in their reserves.  For BP at the moment the coefficient of proportionality is about £2.90/barrel which is very approximately the price they can sell at minus the cost of digging up.  An increase of £3.5K to their capitalization is therefore equivalent to finding around 1200 more barrels of oil, each holding around 120 Kg of carbon.  That results in around 470 tons of additional CO2 when burned.

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