The investment potential of pension funds could help us tackle climate change instead of adding to the problems, says CHRISTIAN VASSIE

In the wake of COP26 how can we deliver the massive carbon emission cuts we need to see?

A resident, let’s call him David, has been worrying about his pension. ‘Where is it invested?’ he asks. ‘How can I be sure that it isn’t being used to subsidise fossil fuel extraction?’

Maya, another typical pension fund member, worries about the world we are leaving our children. ‘Can’t I have a pension without damaging the environment and making things worse for my children?’

They are right to worry; until recently, pension funds have all-too-often seemed to ignore the power they have to help steer action on climate change.

For the past 16 months I have been City of York Council’s representative on the North Yorkshire Pension Fund Committee (NYPF) and have seen at first hand what is and isn’t happening.

Over the past decade pension funds have guaranteed a return for their members by investing in a broad range of products: bonds, equities, property, gold - and petrochemical companies.

Pension fund managers are employed to balance risks and generate a financial return. Nobody likes change and pension funds, like everything else, tend to stick with what they know.

But that is no longer OK. It does not make sense to attempt to guarantee pension fund members a comfortable old age by investing billions into the fossil fuels and their associated carbon emissions that are threatening our collective future.

We don’t have to persuade pension funds that fossil fuel extraction is a bad thing; everyone gets that. The challenge is to decide what we should invest in to guarantee a financial return and protect the planet from runaway climate change.

Last June the NYPF, which has 100,000 members, decided to reduce its equities holdings by 10 per cent (about £500 million) and instead to invest in infrastructure. City of York Council has called for that money to be invested in regional green infrastructure.

The UK has the worst insulated homes in Europe. We waste billions of pounds trying to heat our leaky homes and if we are to reduce carbon emissions we have to sort this out. There are 90,000 homes in York. Few residents would object to seeing their heating bills cut by 90 per cent, but if each home costs £30,000 to retrofit then that’s £2.7 billion we need to find to properly insulate all York’s homes.

Where will we find such a sum? That is where Local Government Pension Funds and other institutional investors come in. If we can create a sound financial model to ensure that the savings in heating bill reductions can be shared between the homeowner and the investor over a period of, say, fifteen years then we can utterly transform our city’s housing.

Not only that, we will also be creating thousands of new jobs, and generating an income for pension funds that they can then use to pay members’ pensions.

The same principles can be applied to transport. If the Government is serious about us switching to electric cars then we need to deliver the infrastructure to make it happen.

Someone living in, say, a terraced street in York needs to be confident that she will be able to charge her car easily. To do that we need to expand electricity production and install on-street charging. That wouldn’t involve cables stretching across pavements, by the way; other parts of the UK are already trialling wireless electric car charging.

It is vital that we apply ourselves to solutions. I know some prefer to bury their heads in the sand, or simply slag off all those in power and complain that it is just ‘blah blah blah’ but in the real world it isn’t enough to know what is wrong with things; the challenge is to work out how to do things better.

There are technological and financial solutions to almost all our climate challenges; all we need is the vision, courage, energy and skills to make the switch and we can protect our financial security and humanity’s future.

Cllr Christian Vassie is chair of City of York Council's Climate Change Committee