Fear of exposure to the risks of ‘stranded assets’ in the fossil fuel industry and the desire to ensure investments are not exacerbating climate change are leading more and more people to join the divestment movement and take control of their investments. In doing so however, many experience numerous bottlenecks – not least in trying to find alternative investment options.

Many people have their pension invested through a managed pension fund, which puts others in control of where their money is invested. For many, the divestment movement has flagged up the fact that their pensions are invested in industry sectors that do not necessarily align with their values. Those who want to make investment decisions themselves and pull their money out of these industries typically find only limited options for reinvestment.

The Guardian, for example, published a quick guide to divesting your pension for those enrolled in a UK pension scheme or fund. This guide mostly involves asking your fund manager to switch your holdings to an index excluding the fossil fuel industry. However, many of the companies in which your fund will now be invested might still be exposed to climate and financial risks, as such funds are in many ways still dependent on the fossil fuel industry.

For those who want even more transparency, a Self Invested Personal Pension (SIPP), available in the UK, allows individuals to take control over how their money is invested. At Abundance, we wanted to create a pension for people who wanted to support and invest in renewable energy projects. In 2015 we launched the Abundance Pension, a SIPP to allow UK individuals to put their pensions into projects that have a positive social and environmental impact. Through the Abundance Pension, people have been able to pick and choose renewable energy projects ranging from wind, solar and biomass which are uncorrelated to global stock markets. It is the world’s first 100% renewable energy pension.

We hope that the Abundance Pension is just the start of a shift in the European investment landscape. Other European countries, notably in Northern Europe and Germany, are already hotbeds in renewable energy investment and divestment movements but pension rules vary across Europe and many are less flexible than the UK’s. While most of the finance for renewable energy projects across Europe comes from the private sector and institutional investors, including pension funds, opportunities for small-scale investors to get involved are growing.

A report by Clean Energy Pipeline outlines a number of trends in the European renewable energy investment market. It finds that more and more pension funds and life insurance companies are attracted to the long term and stable returns, decoupled from volatile equity markets, that renewable energy projects tend to offer. While some pension funds are investing into fossil free portfolios there is still a gap in the market for pension options in Europe offering real transparency and reduced exposure to global markets while meeting the demands of the socially and environmentally conscious investor. The Abundance Pension will hopefully only be the first of many options for those who want to take greater control of their money.

Risk warning

When investing on Abundance, part or all of your original capital may be at risk and any return on your loan or investment depends on the success of the project. Investments tend to be long term and may not be readily realisable. Estimated rates of return are variable and estimates are no guarantee of actual return. Consider all risks before investing.

The Abundance Pension is a self-invested personal pension (SIPP) provided by European Pensions Management (EPM), who are authorised and regulated by the FCA (461099). Setting up an Abundance Pension involves entering into a SIPP contract with EPM to hold Abundance Debentures. Abundance is not a direct pension provider and cannot give pension advice.

By Karl Harder, Co-Founder at Abundance Investment www.abundanceinvestment.com

LINKS

Quick guide to divesting your pension (UK): http://bit.ly/Guardian_divesting_your_pension

Abundance Pension: https://www.abundanceinvestment.com/how-it-works/pensions/

Clean Energy Pipeline report: http://bit.ly/Clean_Energy_Pipeline_report