UK Carbon Future

With the recent disappointment at COP19, the expected weakening of the UK carbon budget at its fourth review in early 2014, and the continuing insistence calls for a third runway at Heathrow, it’s not surprising that the ‘Great British public’ feel powerless in the fight against climate change.

As we were warned last week by scientists and economists from the University of Manchester’s Tyndall Centre for Climate Change Research, if we want to avoid dangerous global warming we must do more than make lifestyle changes. To put it bluntly, re-using plastic bags is not a proportionate response to climate change. What we need is the kind of public pressure that will drive businesses and governments towards the real end-goal - a political and economic system that takes climate risk seriously.

Encouragingly, it seems that many businesses are already keen to support decarbonisation targets. Last week, over 100 organisations comprised mainly of major businesses, investors and trade associations from various sectors of the UK economy, called on the UK government "to stick to ambitious emission reduction objectives for the 2020s to give business the certainty it needs to commit significant investments to the UK's promising low-carbon economy". But what are these signatories doing to reduce emissions now? And what can members of the public do to back the transition to a greener future?

The money we save for retirement is invested by our pension funds. Together, these investors hold over £3 trillion of assets under management and, through the companies they invest in, ‘own’ almost a quarter of the UK’s carbon emissions. Effectively this means anyone with a pension could be funding high carbon industries and the companies drilling for coal, oil and gas. But, by putting consumer pressure on investors, savers have the power to push for change.

ShareAction’s campaign Green Light, which is supported by a coalition of unions and NGOs, aims to give pension savers a voice to demand their pension funds recognise both the risks and opportunities presented by climate change.

And investors should listen. The UK relies on the health of a financial and insurance sector that invests in and insures infrastructure across the world - so the economic impact of unmitigated climate change could be considerable. Taking early action to reduce emissions makes sense, simply from a risk management perspective.

Steve Waygood, Aviva's Chief Responsible Investment Officer, has said: "as insurers and investors, we are quite accustomed to dealing with financial arguments that point towards the benefits of taking preventative and mitigating action before a much more expensive disaster unfolds." Yet the majority of UK pension schemes continue to ignore the financial risks presented by climate change, such as the costs associated with rising energy prices and food and water scarcity.

Equally, the opportunities presented by climate change for the UK economy should not be underestimated by investors. Recent figures from the government’s Department for Business, Innovation and Skills show that the UK's ‘low-carbon environmental goods and services sector’ generated sales of £128.1bn in 2011-2012. The CBI’s 2012 report 'The colour of growth: maximising the potential of green business’ predicted that this sector "could roughly halve the UK's trade deficit" in 2014/15. Yet the average pension fund is still not doing enough to mitigate climate change, with investment in high carbon assets vastly outnumbering allocations to low carbon assets.

The Green Light Report: resilient portfolios in an uncertain world sets out the steps that pension funds can take to become ‘climate-conscious investors’ including: reporting to their fund members on how they evaluate and manage climate risk; investing in low carbon industries and climate mitigation technologies; and disrupting the flow of capital to fossil fuel projects that bring on-stream new sources of carbon.

But to drive pension funds to actually make these changes, savers must put direct pressure on their funds. ShareAction has launched a simple e-action at www.greenlightcampaign.org.uk that allows savers to email their own pension fund, and demand that their savings fund a safer, more sustainable future.

Photo Credit: UK Low Carbon Future/shutterstock