Carbon Emissions from my Pension

Friends, in recent years, I have spent a good deal of time and money trying to reduce ‘my’ emissions of carbon dioxide (CO2).

I have considered my CO2 emissions in four categories.

  • House
  • Travel
  • Consumption
  • Savings

I have written extensively on this blog about about reducing CO2 emissions from the house. So far annual emissions are down from ~3.7 tonnes CO2 per year to ~0.7 tonnes of CO2 per year. I will write more about how I am working to eliminate those residual emissions in due course.

Regarding travel, emissions are probably ~ 1 tonne of CO2 per year, mainly associated with the 3,500 miles a year we drive our family car. But I am traveling less, using public transport when possible, and avoiding flying.

Regarding consumption emissions are probably ~ 1 tonne of CO2 per year, but I am eating less meat, I have stopped drinking milk and I am eating more vegetables. I am also trying hard to stop just buying “new things”.

But I have also been thinking hard about my savings, which in my case is mainly invested in my pension. And this article is about trying to work out the carbon emissions associated with my pension investments – and what I can best do about them.

If you don’t want to read to the end, then my conclusion is that my pension savings are now – by a large measure – likely to be responsible for more CO2 emissions than any other aspect of my life.

My Pension Savings

I am fortunate enough to have two pensions.

I have no control over the first pension from my 13-year University career which ended in 2000. This is a final-salary scheme pension and I cannot influence how the money is invested.

However, I do have some control over my second pension from my 20 year ‘career’ at NPL. This is basically just a pile of money invested by Legal and General (L&G) on my behalf.  I withdraw money from it each month to allow me to continue my – frankly decadent – lifestyle.

The pension is invested in all kinds of ‘assets’ and companies all over the world via a fund called the “L&G PMC Multi-Asset 3” fund.

Click for a larger version. This is how my pensions savings are invested. Basically – I am into everything! In investing circles this is known as a ‘diversified portfolio’.

I can switch my pension savings with L&G from one pension fund to another, but they all do broadly similar things. And how can I tell whether one fund is less damaging to the climate than another?

Estimating CO2 emissions from Investments

In order to estimate CO2 emissions from my pension investments I would need to track down the hundreds of companies in which it is invested, research their carbon dioxide emissions, and then work out how much of those emissions are mine by considering what fraction of their share capital I owned.

That is a lot of work to do for even a single UK company, and it isn’t feasible to do that for my pension savings where I don’t even know the names of the individual companies involved!

And frankly, I don’t need that level of detail. I would be happy to know the order of magnitude of emissions. Is it tonnes per year? Or tens of tonnes per year? Or even hundreds of tonnes per year?

The web has not been helpful, but I did find this Canadian article which listed the CO2 emissions of different companies per CAN$100 of their market capitalisation – the combined value of all their shares.

Click on image for a larger version. Based on a Canadian investment average, CAN$100 yield 14.35 kg of CO2 emissions per year. I have converted this to show the emissions per £1000 based on an exchange rate of 0.63 CAN$ to the pound.

They also helpfully showed the average emissions for a ‘diversified portfolio’ of shares – similar to my pension savings – which (when converted to pounds) comes out to 228 kgCO2 per year £1000 of savings.

We can also estimate this very approximately in other ways.

For example one could take the value of the FTSE100 Share Index (~2.0 trillion pounds [£2.0 x 10^12]) and a divide by the UK’s annual CO2 emissions (~450 million tonnes CO2 [0.45 x 10^12 kgCO2/year]) to yield 225 kgCO2 per year £1000 of savings. This estimate is based on the idea that the companies in this index are responsible for the majority of the UK’s CO2 emissions.

Alternatively one could take the value of the Dow Jones Share Index (~27 trillion dollars [£27 x 10^12]) and a divide by the USA’s annual CO2 emissions (~4500 million tonnes CO2 [4.5 x 10^12 kgCO2/year]) to yield (after converting from dollars) 133 kgCO2 per year £1000 of savings.

All of these estimates are inaccurate, but – slightly to my surprise – they are all of the same order of magnitude. I will take this as an indication that this is correct order of magnitude.

Given the ‘diversified portfolio’ used by my pension fund, it seems likely that every £1000 of my pension investments is responsible for on the order of 100 kgCO2 emissions per year. Let’s use that figure and bear in mind that it might be easily twice as large, or possibly a bit smaller.

When I looked today, my L&G pension fund stood at £175,000 and so based on this sort of analysis, my savings are responsible for ~17.5 tonnes of CO2 emissions per year. My university pension is probably associated with similar emissions.

So my pension savings are likely associated with ‘a few tens of tonnes’ of CO2 emissions per year, much greater than emissions associated with the house, my travel or my consumption.

What to do? Follow the carbon dioxide…

Friends, I have put off doing this calculation because I feared the answer, which I confess I did not find at all surprising.

The fact that my pension – which I am relying on to keep me comfortable in my decaying years – is my largest source of carbon emissions is deeply troubling.

It’s troubling because all my options are problematic.

In order to decide what to do, I think it is important to focus on the carbon dioxide. So for example, at the moment, because of the battery and solar panels, I have been off-grid for 33 days. This allows me to know for certain that this house is emitting no carbon dioxide when it otherwise would have been.

But changing my pension investments from one fund to another? I think that this will result in no changes in carbon dioxide emissions, even if the great carbon accountant in the sky no longer associates those emissions with my pension.  I think that is just accountancy.

I could probably move my pension savings to a fund marked as ESG (Environmental and Social Governance). Companies in these funds are deemed to be operating ‘ethically’. Presumably the implication is that all the other companies are unethical! But having read a little bit about ESG certification, it seems to be a tickbox process, and there is likely to be widespread fraud and greenwashing.

And even if I did move my savings, the ‘unethical companies’ producing steel and oil and weapons – things which society collectively still needs – would not cease to exist. I think this would again be mere accounting.

Indeed, almost any diversified portfolio – the kind I would choose to retain the value of my savings – by definition is invested in the roots and branches of our western society which is collectively failing to address Climate Change.

So I am unsure what to do.

The only thing that I feel clearer about after this analysis is that if I had a chance to use this money to invest in projects which genuinely reduced CO2 emissions – wind farms or solar farms or energy storage projects – then devoting a fraction of my savings to that would be likely to genuinely reduce the emissions associated with my pension savings.

In conclusion, and I hope you don’t feel this is a cop-out – I feel this analysis shows the limited applicability of the concept of a ‘personal’ carbon footprint.

In truth, our society’s carbon dioxide emissions are all ‘ours’ whether we own shares in the companies or not. Ultimately, we need to act collectively to eliminate them.

2 Responses to “Carbon Emissions from my Pension”

  1. Richard Says:

    Thank you for this and indeed your other blogs which I discovered recently in my quest to find a solar and battery installer, coincidentally just across the river from you in Ham. I really appreciate your fun and bite sized way of looking at all these issues.

    What’s prompted me to write is your piece here on the carbon emissions / global heating associated with your pensions. I’ve been looking into this recently and discovered some useful resources:
    1. through which I have learned about some green / ethical pension and other investment providers who go significantly beyond tick box ESG screening and also about impact investment opportunities for directly supporting renewables etc.
    2. The Big Exchange, an investment platform that doesn’t include pensions (yet?) but is using a more rigorous approach to identifying funds that do good rather than simply exclude the worst.
    3. Ethicalconsumer which has done research on ethical pension providers and if you trust their methodology do find significant differences.

    In short, I feel that what we do with any investments can make a huge difference and there are ways we can direct our money away from climate change causing to climate change mitigation efforts. Yes, as you say, we are embedded in a global system so can only do so much. But for me it would make a difference knowing that any money I had invested is helping address the climate crisis or at least moving corporates in that direction.

    Nothing is a satisfying as directly reducing your own contribution to climate heating, I agree. My dilemma is whether to use a dormer roof for solar panels given that at some point the roof will need repair / replacement and the difficulty / expense of cleaning the panels. Maybe I need to redo the roof before installing the panels to give the roof as long a life as possible…

    • protonsforbreakfast Says:


      Regarding Investments.
      Thank you for the links about pensions. I will check them out. And I agree, our investments have a serious impact on the world.

      Have you come across Ripple? It’s an outfit that enables collaborative ownership of wind farms. For £2,000 we bought a fraction of an and farm currently being constructed in Scotland that should just offset our winter emissions. The profit – if there is any – automatically comes off our electricity bills.

      Regarding solar.
      I have not cleaned the panels in two years and they seem to be doing fine. No obvious sign of degradation and they look clean after rain. But they are on a 40° roof. We have just installed some on a flat roof and they are on a frame that slopes at only 12°, so I will keep an eye on those to look out debris that is not cleared by the rain.

      Would your panels be on the flat part of a roof or a sloping part?

      If you are planning roofing work, it’s best to do the panels at the same time to save on scaffolding costs. The panels themselves are not much more than most roofing coverings ~ £100/per square metre.

      Best wishes


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