UK pension funds have at least £10.5 billion invested in companies which are extracting or burning coal according to new research published today. Researchers say that this poses unacceptable risks to pension savers, and to the environment.
The findings are published as members of the House of Lords prepare to debate the government’s Pensions Schemes Bill, including a proposed amendment that would require pension funds to divest from thermal coal.
Coal is the most polluting fossil fuel, and a major driver of the climate crisis. The UK’s last coal fired power station closed in 2024, making the UK the world’s first major economy to phase out coal power. Conservative and Labour governments have both pushed for other countries to follow the UK’s lead. The fact that UK pension funds are continuing to invest so much of saver, employer and taxpayer contributions in coal around the world may therefore be a source of embarrassment for the government.
Greenhouse gas emissions from the UK’s power sector fell steeply between 2019 and 2025 – cutting 17 million tonnes of CO2, which is equivalent to taking around 10 million petrol and diesel cars off the road. This was driven in large part by the increase in renewable energy and the phase out of coal. However, according to researchers, that drop in emissions might be eclipsed by a similar level of annual emissions from coal extraction and burning being funded by UK pensions funds overseas.
Lord Sharkey, who has tabled the amendment, said:
“The UK is rightly proud to have eliminated coal from our own energy mix. It is absurd that our pension funds continue to finance its expansion and use overseas. Coal is hugely destructive for the climate and nature, and it is also a risky investment. Divesting from thermal coal is in the interests of both pension savers and the planet.”
Economists and campaigners have long warned that coal and other fossil fuel investments risk becoming “stranded assets” as global energy systems shift towards cheaper, cleaner sources such as solar and wind. Continued exposure to fossil fuels therefore poses growing financial risks to pension savings, as well as undermining climate goals.
Baroness Hayman, who is also supporting the amendment, said:
“Many pension funds are already taking a risk-based approach to reducing their exposure to coal and other fossil fuel investments. Parliament now has an opportunity to put in place proportionate, practical legislation to support an orderly transition across the sector to protect pension savers from the growing financial risks of continued reliance on fossil fuels.”
Baroness Griffin, who is also supporting the amendment, said:
“Thermal coal is the ultimate short term investment – so how can it be in savers’ interests that our pensions continue to back it? We need to take the eminently sensible step to require pension schemes to phase out investments in the most polluting fossil fuels on the basis of their financial risk.”
Marloes Nicholls, head of advocacy at the Finance Innovation Lab, which was involved in the research, said:
“People want to retire with a decent income and a liveable planet, yet our research shows pension providers are continuing to invest savers’ money in industries that threaten both. We hope the government will listen to the growing call to move UK pensions out of coal once and for all.”
A spokesperson from Leave It In The Ground, who analysed the data from the different pension funds, said that the scale of coal exposure was greater than expected:
“We anticipated that some pension funds would still be invested in coal, but we were surprised to find that this remains the norm across much of the sector. Limited disclosure makes it difficult to calculate the full scale of the problem, which just underlines the urgent need for greater transparency. Pension savers have a right to know how their money is invested – and a right to expect that it won’t be harming their own long-term interests.”
Our briefing paper is available online here: https://financeinnovationlab.org/insights/uk-pension-schemes-and-thermal-coal/
The data set behind the calculations is available here: https://www.leave-it-in-the-ground.org/resources/uk-pension-schemes-and-thermal-coal/