The investments of UK pension schemes enable the release of 330 million tonnes of carbon every year, analysis by Make My Money Matter (MMMM) shows.
The ethical pensions campaign - founded by filmmaker and activist Richard Curtis - said the study, conducted by sustainability research house Route2, showed the nation's retirement savings are driving the climate crisis even more than anticipated and highlight the critical role of pensions in meeting the UK's net-zero targets.
It said, if the UK pensions industry was a country, it would find itself in the top 20 carbon emitters globally and, to offset its emissions, the industry would need to reforest 50% of its entire landmass.
MMMM said Route2's findings further reveal how the pension industry fuels the climate crisis through investments in the worst polluting companies - showing that, for every £1,000 invested by UK schemes, £60 is estimated to be invested in the fossil fuel industry.
It said while many climate risk more seriously - with around £800bn invested through schemes now committed to a "robust" net zero - voluntary commitments were not going far enough, with 70% of the largest schemes having not made net-zero commitments, leaving almost £2trn invested in schemes which are yet to align with the Paris Climate Agreement.
MMMM called on the government to make net zero mandatory for all UK schemes and providers at COP26, building on the chancellor's recently announced Sustainability Disclosure Requirements.
It said that only with such regulatory action would the UK be able to act with the speed and scale needed to significantly reduce the emissions of the pensions industry and limit global warming to the target of 1.5-degrees.
Curtis said: "When you think about pensions, you hardly ever think carbon emissions. But our report turns that on its head. With pensions enabling emissions which exceed the UK's entire CO2 output, the message couldn't be clearer: the time for green pensions is now. Because if we fail to lower the emissions of our pensions, we will fail to prevent the worst effects of catastrophic climate change; jeopardising the very futures our pensions should be saving for."
Curtis added that with COP26 just days away the government must "put our pensions industry to work on tackling climate change by lowering their emissions, and using their pension power to transform the companies they invest in".
He explained: "While we've seen green shoots of progress with voluntary net-zero commitments, £2trn remains in schemes which have failed to act, undermining the UK government's own net-zero targets. That's why we believe it's time for the government to make net zero mandatory for all pension schemes, and make sure the trillions in our pensions helps tackle the climate crisis, not fuel the fire."
Route 2 founder Daniel Dias commented: "While pension funds do not directly produce significant greenhouse gas emissions, the way they allocate their capital has a significant impact on the long-term behaviour of the companies and countries they invest in.
"Our analysis has shown that, because of the vast sums of money that they are responsible for, the levels of greenhouse gas emissions that they have influence over is significant. It also demonstrates that selecting pension schemes that are more climate sensitive is an effective tool in combatting climate change."