Is your pension invested ethically?

The High Pay Centre has issued a Briefing Paper, entitled: Pension saver views on the social and environmental impact of investments. The paper, based upon polling undertaken jointly with Survation, suggests that people think companies’ social and environmental records should be important determinants of where their pension savings are invested. 

Of the 1,026 people polled, 66% stated that they want their pension fund to reflect their ethical values and beliefs.

Almost a third of people consider insufficient pension savings as the biggest threat to their quality of life in their later years (29%), but considerable numbers of people see factors such as climate change (21%), the slow growth of the UK economy (19%) or the divide in society between the rich and the poor (13%) as bigger threats.

Over a third of people (37%) would be willing to accept some reduction in their pension saving, if it were more ethically invested.

While half of respondents think generating financial returns is an important factor pension funds should consider when investing in companies (50%), but almost as many people said the same of the pay and conditions of a company’s workers (42%), the company’s environmental impact (37%), and the company’s approach to human rights issues (37%).

These figures indicate that many savers either recognise the link between the employment and environmental practices of the companies they invest in and their own working conditions and wider environment, and/or don’t want to be complicit in the mistreatment of workers or the environment by companies they have a stake in.

At the same time, the survey reveals limited understanding of pension funds investments, and a limited capacity to engage with pension funds on environmental or social issues. 

A majority of people (53%) consider themselves to have a low understanding of pensions, investments and financial markets and are not aware if their pension fund has an ethical investment option.

And of those polled who haven’t looked into how their pension fund is invested, the main reasons given are because of their low understanding of pension, investments and financial markets (45%), because of their trust in financial professions (40%) or because of a lack of time (30%).

These responses suggest that pension funds and policy makers should not assume that members will make their feelings known if their investments are contradicting their values or long-term interests.

For ESG to be a genuine effort to align investment practices with the interests of people and planet,  pension funds need to deepen their engagement with their members, and incorporate a more holistic conception of members’ interests into investment practices.

For more information about ESG investing, read our article ‘What is ESG investing?’, watch back our November 2021 webinar ‘ESG: Investing in our future’, or get in touch with a TPO adviser.

The information in this article is correct as of 21/04/2022.

Please note: Investment returns are not guaranteed, and you may get back less than you originally invested.