The obsession with ESG investing is leaving funds with ludicrously low growth rates
Virtue signalling has destroyed the British pension
07 Jan 2026
This article was first published in The Telegraph.
A microcosm of Britain’s economic decline likely exists within your pension.
The hard-earned savings of millions should be delivering growth and retirement wealth. Instead, whether defined contribution pot or large defined benefit scheme, they are stagnating. Ninety per cent of us would be better off by simply shoving our retirement savings into a FTSE tracker, rather than using our workplace pension schemes.
We recently learnt that the Universities Superannuation Scheme (USS), Britain’s largest single pension scheme, which manages £73bn, has delivered annual returns of just 1.7 per cent over the last five years – compared to 4.4 per cent inflation over the same period. By contrast, Australia’s worst performing superannuation investment option delivered 4.6 per cent in the same period (its best delivered 11 per cent).
Why are British pensions underperforming so dramatically? Pension managers should have one goal: maximising financial returns. Instead, ours weaponise Britain’s savings to pursue environmental and social goals in accordance with ESG (environment, social and governance) regulations. They do so without the permission of the people who have entrusted them with their money.
The USS tell us that they are committed to net zero by 2050 or sooner and that they will “encourage the companies [they] invest in to transition towards a low-carbon world”. But the effort and money spent on decarbonising by these companies should be spent innovating and enhancing profitability. This is private sector stealth taxation – not felt month by month but annual underperformance of as little as one per cent will cost you tens of thousands by the time you hit retirement.
Despite net zero, Britain’s fossil fuel sector has performed well. The FTSE 350 Oil, Coal and Gas has delivered 70 per cent over the last five years. But these returns are denied to pension savers by green pension funds such as LFPA, London’s local authority fund. Instead, they invest in green infrastructure such as wind farms and solar power. Yet, far from being naturally good performers, these investments are wholly dependent on the state’s willingness to deliver handouts, and the state is desperate to keep them afloat to meet its self-imposed net zero goals Whatever funding doesn’t come from government subsidy largely comes from pension funds which are pressured toward green projects by the state and the regulators.
A negative feedback loop has developed between the Blob and large asset managers as they egg each other on to pursue growth-destroying policies. When Rishi Sunak briefly wobbled on net zero, Britain’s major asset managers wrote to him, urging that Britain remain at the “forefront of the global transition to net zero”. When the FCA introduced the most stringent ESG requirements to date, rather than pushing back, pension managers welcomed it and highlighted the urgency of climate action.
Another ESG-induced challenge afflicting pensions is underqualified people in power. We have probably all worked with individuals who appear to lack the qualities their position requires. Diversity requirements now mean that your pension provider and the companies it invests in are likely clogged up with directors and staff who are not appointed solely on merit.
Legal and General, Britian’s largest pension manager, had a goal for 50 per cent of their staff to be women by 2025 and for 17 per cent of board members to be ethnic minorities by 2027. They don’t stop there. If a portfolio company fails to be sufficiently diverse in their leadership, they promise to vote against them at their AGM.
For instance, Howdens, the joinery company, makes kitchens and delivers steady dividend rises. This is not an industry famed for its diversity. At its most recent AGM Legal and General voted against them for failing to have an ethnic minority member on their board.
These diversity targets, combined with the unambitious acceptance of poor returns and overbearing regulations, exclude and deter the most talented investors, who instead choose to work at boutiques and start-ups, often far from Britain. This hurts ordinary pension savers, who depend on talent to turn their deposits into a retirement income.
ESG, which embeds net zero and diversity targets, tends to be the default pension setting. Your pension likely falls under its sway. Whilst technically possible to pivot your savings towards growth, you must first navigate customer service that is scarcely better than that of a government department. You will be warned multiple of times of the risk of doing so, not once told of the incentives.
Pension funds should not act as an extension of the Blob: a captive capital pool for government pet projects and social agendas. These funds must decouple themselves from the ESG diktats which are hastening economic decline across the board. They should instead be laser-focused and duty-bound on the one thing that matters: delivering returns for hard-working Britons.