Comment by Tom Elliott, Senior Energy Transition Advisor – Place, at Energy Systems Catapult.

More than two-thirds of pension funds have a commitment to Net Zero alignment in place (Climate Policy Initiative – State of European Pension Funds’ Net-Zero Transition). With billions of pounds under management, pension funds represent untapped potential to accelerate the shift to clean energy and infrastructure and become key players in the UK’s energy transition, helping to close the gap between commitment and action.

The UK’s pension revolution

The Pensions and Lifetime Savings Association recently launched their Pensions & Growth: Creating a Pipeline of Investable UK Opportunities report, which highlights a big question: How can we support pension funds to invest in emerging, higher-risk sectors like climate change and infrastructure? Chancellor Rachel Reeves is responding to the challenge by gearing up for what she terms the ‘biggest pension reform in decades, channelling billions into the UK’s economy, with a focus on energy infrastructure, tech start-ups, and public services.

This isn’t just wishful thinking – it’s inspired by real-world success. Canada has been leading the way, pooling pension funds to unlock larger-scale investments. But what does Canada’s approach have to do with the UK’s Net Zero journey? Turns out, quite a lot.

Canada’s sweet spot in the UK’s energy transition

The Canadians have been quietly making waves in the UK’s energy transition for years. Back in 2017, the Ontario Teachers’ Pension Plan snapped up 2.7 million smart meters from SSE, proving that pensions can power tangible change.

In recent developments:

• Octopus Energy secured a £300 million boost from the Canada Pension Plan Investment Board (CPP Investments). That’s £300 million of fresh support for one of the UK’s most innovative clean energy companies.
• CPP Investments is also betting big on the UK’s wind resources, consolidating its offshore wind holdings into Reventus Power, a UK-based portfolio company set to become a global offshore wind platform.

In short, Canada is showing us how pension funds can drive meaningful change and making us wonder why the UK isn’t leading this charge on home turf.

How can UK pensions power Net Zero?

The UK has no shortage of opportunities to invest in its energy transition. From rich offshore wind resources to emerging technologies, the potential is massive. But unlocking this requires more than goodwill. It needs bold leadership, the right policy frameworks, and, crucially, a willingness to embrace risk.

At Energy Systems Catapult, we’re exploring this very challenge with Phoenix Group. The question is: How can we inspire UK pension funds to invest in UK’s energy transition? It’s not just about funding; it’s about building the confidence to invest in complex, long-term projects that will deliver both returns and environmental impact.

Pensions as Net Zero catalysts

With Reeves’ reforms on the horizon, there’s hope that UK pension funds will follow Canada’s lead and step up to the plate. Imagine the impact if just a fraction of the UK’s £3 trillion pension pot flowed into Net Zero projects. The results could be transformative, not just for our economy but for our planet. The challenge now is to turn potential into progress.

If we get this right, it won’t just be Canada’s pension funds driving the UK’s transition, it’ll be the UK’s, too.