Lower your carbon footprint through responsible investing

Every time we pick up a paper or listen to the news, it's hard to escape reports of climate catastrophe. There are near-daily reminders that the planet needs help, with unpredictable weather, floods, forest fires and extreme temperatures.

Climate change is the result of long-term trends and patterns due to human activity. Using fossil fuels over time has increased greenhouse gases leading to global warming. In Ireland, we are experiencing different temperatures, rain patterns have changed, sea levels are rising, and the number of intense storms is set to increase (Environmental Protection Agency).

It's not just fossil fuels alone or unsustainable energy sources that cause climate change. Deforestation, land clearance, transport emissions, and mining all play a role. As a result, many of us are asking what we can do, personally, to help in the fight against it. You may not realise, but your finances can play a key role in positively impacting climate change and, in particular, your pension through responsible investing.

Pension power makes a difference

The decisions you make around investing, such as your pension provider and the specific funds you choose to invest in, can be a positive step towards reducing your carbon footprint and contributing to a better world.

When you set up a pension, your money doesn’t just sit there. It’s linked to investments  on your behalf. A big challenge is that people are not always aware of what their pension money is invested in. Most people are enrolled in a pension default investment strategy so the question arises – what are you actually invested in?

Traditional funds invest in a broad range of companies across the world but in 2022, there is increased demand for investment funds that look beyond financial metrics and to also consider environmental factors (The Irish Times, 2022). By investing in funds that also take account of environmental, social and governance (ESG) issues as part of their investment approach, you can help to make a positive change in the world while aiming to grow your pension.

Unlike traditional funds, ESG funds invest less in companies that may be harmful to the planet or society such as those that are involved in fossil fuels, controversial weapons or tobacco manufacturing. Instead, they actively look for assets that score highly on environmental, social and governance factors

There is heightened concern over climate change, and growing discomfort about what it means. The number of people who believe they personally can help the environment has fallen in recent years, dropping from 79% in July 2019 to 68% in May 2022 (RedC on behalf of Irish Life, 2022). However, investing in a pension fund with a responsible investing approach is a key step you can take to improve your climate impact.

If you’re interested in making a more positive investment and understanding the impact it can generate, be sure to check out this new carbon calculator. It shows you in real-world terms – like litres of petrol saved or energy-efficient lightbulb hours – what responsible investing looks like for certain Irish Life Assurance funds.

Investment impacts

Responsible investing is a good step for the planet and a way to reduce our impact as a society. Concerns about planet health and financial health do not have to be mutually exclusive. Investing responsibly may help to enhance long-term returns (FTAdviser, 2021).

A long-term strategy for change

Pensions are also important for steering the world towards greater climate action. A pension takes a long-term view.

Reducing investment in on companies that contribute negatively to climate change, such as oil, mining, and fossil fuels, and allocating it to companies that act responsible with a focus on ESG factors, helps drive the planet to a better future.

If we look at the big picture of tackling the challenge of climate change, all of our actions are important. A responsible investment approach is just one part of the many steps towards meaningful action.

About Irish Life Assurance Irish Life Financial Services is tied to Irish Life Assurance for life and pensions.

Irish Life Assurance helps you to do right by your money. They believe in a better future for all, so invest your pension savings in a way that does right by you and the planet. That means investing less in companies that do harm and more in companies and assets that manage their environmental, social and governance risks in a better way. They believe these investments are likely to perform better over time as a result and understand the need to act responsibly for all stakeholders as well as shareholders.

As climate change poses a significant risk to all assets, investment in carbon intensive companies in actively being reduced in the following ways:

• Carbon intensity - Our funds have less exposure to companies whose business activity causes significant carbon emissions.
• Fossil fuel - Our funds have less exposure to companies whose business model is based on coal extraction, oil and gas activities.

Find out more about responsible investing with Irish Life Assurance, by talking to one of our financial advisors today.