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I GENERALLY regard myself as an environmentally conscious consumer. I stopped eating meat years ago and I travel by bike or public transport when possible. I won’t bore you with my other virtues, but suffice it to say that if there is a sustainable lifestyle box, I probably tick it.

To be honest, I might as well not bother. I also own stakes in some of the world’s most environmentally destructive industries: fossil fuels, mining, petrochemicals, cement, steel, aluminium and cars. Royal Dutch Shell, BP and Rio Tinto are just some of the companies in my portfolio, and there are almost certainly many more I don’t know about. The greenhouse gas savings I make through my lifestyle choices are dwarfed by the ones generated by my support for these companies and industries.

I didn’t actively purchase stakes in them. Somebody did it for me. I probably could have stopped them, but I didn’t. If you have a personal pension plan, a similar story is probably true of you, too.

Now I am trying to get out of my investments, but I can’t. Not easily, anyway. “It’s not like veganism, where you can just make a choice and go to the shop. It requires a lot of persistence to do this,” says Michael Kind of UK pressure group . What’s more, as I investigated how to extricate myself from my pension swamp, it became clear that doing so might actually do more harm than good.

Pensions are big business. The Organisation for Economic Co-operation and Development (OECD) calculates that the UK workforce is sitting on a . Globally, it puts the figure at $32.3 trillion. That money doesn’t sit in bank vaults accruing interest, it is being invested in projects that require capital. Around half the world’s investments are , according to ShareAction.

Those investments could be in the sustainable industries of the future such as renewables, battery technology or carbon capture and storage. Some are: in the US and UK, between 20 and 25 per cent of investment funds, the things your payments into a pension are ultimately invested in, are labelled as “sustainable”. Even if you take that at face value, it means a goodly proportion of your pension pot is probably flowing into dirty industries we need to make a thing of the past: coal-fired power plants, oil exploration, industrial-scale cattle ranching and cement-guzzling infrastructure.

The potential for change is huge. “I advise a lot of pension funds,” says , associate professor of law and finance at the University of Oxford. “Given the amount of money they control, they can exert a lot of influence. Capital is power.”

Making sure our own money is invested in companies working for a sustainable future is also one of the best things we can do for the planet. According to one oft-cited (though disputed) analysis, an individual shifting their investments could be an order of magnitude more effective at halting environmental destruction than the same person making lifestyle changes such as going vegan or car-free (see “The 27X factor“).

“Changing your pension isn’t like veganism, where you can just make a choice and go to the shop”

Pension-blindness

Until recently, I rarely gave a moment’s thought to any of this. Retirement felt a long way away and I assumed that when it arrived I would have amassed enough money to make it comfortable. Exactly how that would happen I neither knew nor especially cared about.

Then I watched a documentary called , co-created by conservation body WWF, which explains the links between finance and the environment, for good and ill – mostly ill. A key message is how pension funds channel money – my money – into environmentally destructive industries. I felt sickened and annoyed, mostly with myself. How had I failed to see it?

It turns out that my pension-blindness isn’t unusual. “There’s a real lack of knowledge or understanding of what pensions are and how they work,” says David Hayman, campaign director of the pressure group . “Eighty-five per cent of people [in the UK] don’t make any association between their financial products and climate change.”

I am a member of three different pension schemes, all of which are managed by financial services companies. They invest my money, a not inconsiderable sum of several hundred thousand pounds, on the (correct) assumption that their solemn “fiduciary” duty is to look after my interests. It seems like a no-brainer that I ought to be able to demand change if my perception of my interests doesn’t align with theirs. “It’s your money. You should have a choice about where it goes,” says Hayman.

And I do have choices, but making them is difficult. Even step one – finding out exactly where the money is – can be like squeezing blood from a stone. “There really isn’t much transparency,” says Kind. “There isn’t any legal requirement for pension schemes to publish their investments. With some digging you can find out, but you essentially hand over the money to them and they look after it.” One of my providers refused to disclose what my money is invested in on the grounds that the information is its intellectual property.

Even if you find out, shifting investments can be all but impossible. Surely, you might think, I can just instruct the fund manager to sell my fossil fuel stocks and invest in more sustainable companies instead? It turns out to be harder than it sounds. I don’t actually own the stock, the fund manager does. The decision to buy it is probably part of a broader strategy to invest in a portfolio, say of companies listed on the UK FTSE100 share index, rather than an active decision to purchase a specific stock.

“That’s where many of the complexities come in,” says Hayman. “Often, pension providers are buying into markets, they’re buying bundles, they’re buying packages, as opposed to buying individual shares.” My workplace pension fund, for example, is invested in a bog-standard equity fund that owns stocks in more than 2400 companies worldwide; its largest investment, in the consumer goods company Unilever, amounts to just 2.6 per cent of its total holding.

In our best interests?

And in many cases, the fund manager isn’t answerable to individual investors. In most workplace pensions, for example, the fund’s actual customer is your employer. The company could approach the fund manager on behalf of its employees, but most firms usually have other priorities.

This is a major loophole in corporate responsibility. “Ninety-five per cent of organisations don’t mention their pensions within their sustainability targets,” says Hayman. “A company might remove flying from its staff travel options or only serve vegan food in its canteens, but continue to fund the airline industry and the meat industry through its pension fund.”

At the heart of the issue – and a possible fulcrum of change – is the concept of fiduciary duty. In the UK and many other places, it amounts to a legal requirement for pension funds to invest money in a way that is in their clients’ best interests. Many fund managers have historically interpreted this as maximising the short-term value of the fund, regardless of the social, environmental or ethical consequences.

But the law is unclear on what fiduciary duty actually demands of fund managers. In 2014, amid growing confusion, the UK Law Commission – people appointed to ensure a pension scheme is properly run – and decided that the “maximise” interpretation was too narrow. Although trustees’ primary focus is indeed financial return, they can also take a longer view and consider non-financial factors, such as the social, environmental and ethical concerns of investors.

This clarification has somewhat changed the UK landscape, says Hayman. It allows managers to avoid investments that may pay out in the short term, but risk making their clients’ futures more precarious, say by accelerating climate change. It also empowers fund managers to steer clear of shares whose value is likely to decline in the longer term due to government regulation, falling returns or consumer pushback, as increasingly applies to fossil fuel companies. And, of course, it means investors, whether individuals or their employers, can and should put pressure on fund managers to avoid investments they disapprove of.

The meaning of fiduciary duty is also the subject of vigorous debate in the US. Last year, the Department of Labor ruled that and focus on one thing: profit. But in March this year, it announced that after being inundated with complaints. A new interpretation of fiduciary duty will be issued in due course.

At the same time, the widespread belief that sustainable investment equates to principled poverty has been called out. “There is a tonne of evidence that sustainable funds have matched or outperformed non-sustainable ones over the past 10-year period,” says Hayman. “This is absolutely not about charity or do-goodery.”

But whether pressuring pension funds to offload unsustainable stocks is the right strategy is another matter. Called divestment, this can be a useful tactic for largish, high-profile investors such as universities and religious organisations. “The aim is to do the [divested] company financial and reputational damage,” says Kind.

Yet the impact of a personal pension holder shifting their investments is puny, and possibly counterproductive. Even if the pension fund offloads the shares, somebody else is buying them. “If you’re an investor who would engage with that company and try to create change, then it’s worse that you’ve sold your shares to somebody who might not care and just reap the profit,” says Kind.

“The impact of one pension holder shifting investments is puny, and possibly counter-productive”

The alternative strategy is called engagement. This means holding one’s nose, hanging on to the investment and using it as leverage. “Shareholders have huge power to create change within companies,” says Kind. “You need the pension funds and the asset managers to be activist investors, pushing the CEOs of those companies to go faster, and to go further, and then to hold them to account on actually delivering against targets,” says Hayman.

So rather than attempting to demand, or getting my employer to demand, that my pension fund simply offload shares in fossil fuel producers, I need to put pressure on the pension fund to demand change from inside these industries. Engagement can make a difference to an extent that divestments have failed to do, says Kind. Shareholder resolutions, which companies are legally bound to act on, are a powerful force for change. Shareholders in the banking group HSBC, for example, recently persuaded the company, which is one of the largest lenders to fossil fuel projects, to withdraw from funding coal mining and coal-fired power stations – although it has since turned out that this doesn’t apply to the bank’s asset-management arm.

Now, though, I am caught on the horns of a dilemma. To know whether divestment or engagement is the better strategy, I need to discover whether my pension providers are activist investors, or just in it for the money. Again, that is hard to tell. When I attempted to find out who my pension trustees are via my pension providers’ customer contact channels, I was either fobbed off with standard responses or received none at all.

Pushing for change

But there is a push towards greater transparency in the pensions sector. New legislation in the EU and UK, for example, requires greater disclosure of companies’ exposure to climate change and their contribution to it. Behind the scenes ahead of this November’s crucial COP26 climate summit, there is a global push to agree financial reporting and transparency rules, so companies must declare how their business plans are consistent with climate goals, so they – and the funds that invest in them – can be judged on that.

That could add some welly to the growing net-zero movement. This may currently be the most effective lever for investors like me to drain the financial swamp. A company that makes a net-zero pledge publicly commits to reducing its overall greenhouse gas emissions to zero by a certain date, usually 2050. “A number of pension funds have committed to net zero,” says Wetzer. By definition, these commitments are public, so finding a net-zero pension provider should be easy for individuals and enlightened companies.

Wetzer warns that corporate net-zero commitments have a nasty habit of containing a lot of greenwash. A recent comment piece in Nature by Joeri Rogelj at Imperial College London bemoaned the and called for rapid improvements in time for COP26.

Nonetheless, says Wetzer, net-zero pledges allow small investors to get a handle on their pension funds’ commitments to sustainability. “If you are serious about this, ask your pension fund what they have in terms of net-zero plans,” he says. Doing that can get you two for the price of one. Given the leverage pension money has over other industries, net-zero pledges in the pension industry can ripple through the entire system. “Pension funds can use their ownership stakes in companies to demand that management adopt meaningful net-zero targets,” says Wetzer.

My personal quest to discover where my money is, and make it work for the planet rather than against it, has just begun. I have found myself a financial adviser who understands my goals and have granted him the authority to act on my behalf. I have asked him to find out what he can about where my pension funds are investing and suggest ethical, sustainable alternatives.

It is clear it will be long and arduous. I haven’t even begun to look into other places in which my money might end up invested in things I don’t want it to be, for example when I put money in a bank savings account or take out an insurance policy. But I am determined to see it through, and I hope I can inspire others to do so too. When the trail goes cold, I remind myself that it’s my money – and everyone’s planet. Yes, financial service providers have a duty to look after my best interests. But as Kind points out, “it’s probably in our best interests to retire on a planet that is habitable”.