Sustainable investment in pensions is key concern for savers

by 21 Oct, 2019

We at New Money know people care about sustainable investment. That’s why we launched the The New Money Pension Manual – your guide to making saving today count for tomorrow.

However, pension people at the recent Pensions and Lifetime Savings Association (PLSA) conference in Manchester, seemed to disagree. Now I’ve been around a while and I know the pensions industry isn’t exactly the avant garde of finance, but I didn’t expect to see quite how far behind it is on sustainable investment, nor how wildly out of touch with young people it is.

Sustainable investment sluggards

Perhaps unsurprisingly, this crowd was not too keen on acknowledging the rising tide of climate awareness. Nor, the appetite for sustainable investment that is seeing young people all over the globe finally start looking into where there money is going, and not liking the results.

In-fact, on day two of the conference we were warned that Extinction Rebellion had targeted us for a protest, just as they had done at the Manchester pension fund – which invests £500 million in Royal Dutch Shell alone.

“I think people overestimate how much young people care about ethical and sustainable investment” said the industry-endorsed representative of ‘Young Money’ at the end of the conference. Her view was supported by a leading BBC money journalist and the ex-pensions minister at the final debate of the week.

You could have knocked me over with a feather. I wondered if they had seen the piles and piles of evidence showing young people, in-fact, care deeply about sustainable investment?

The latest, and biggest, is a survey of 6,000 people by the Department for International Development that showed 71% of millennials are interested in responsible and sustainable investment versus 56% for the broader group. Meanwhile, 56% of respondents said they would opt for a fully or partially sustainable pension if they were given the choice.

Then there’s the one from Franklin Templeton that showed that 45% of those aged 22-38 would save more into their pensions if they knew they were invested responsibly and – MORE FRICKIN OBVIOUSLY – the millions of people MARCHING-ACROSS-THE-WORLD. Despite all this, though, pension people reckon this sustainable investment lark is still just a marketing gimmick for a select few.

It’s the climate, dummy

Now, to be fair, parts of the industry itself – particularly the investing side of it – is light years ahead of these dinosaurs. BNP Paribas, for example, already manages all of its investments with climate and environmental risks in mind. Thankfully, it has just taken over some of the investing for one of the country’s biggest pension funds – Nest – which itself is a climate leader. Speaking at the beginning of the conference about how the industry might get young people engaged, Helen Dean, chief executive of Nest suggested that ‘climate’ might be one topic.

Again, for anyone outside of the industry this is such common sense it will seem incredible. Equally, for anyone outside the industry, the idea that a pension fund would invest in tobacco stocks seems ridiculous – TRULY ridiculous considering we have had a smoking ban in place in the UK since 2005. Invest in tobacco they do, though. Indeed, Nest is the only national pension fund to pledge to divest from tobacco.

I have looked in detail at an excruciating number of pension funds in the UK for The New Money Pension Manual. From that I can say with almost 100% certainty that, unless you or your employer has actively chosen an ethical, Shariah or sustainable fund option (and only about 2% of us do), you are invested in tobacco companies. And unless you or your employer are making some super extra efforts by picking your own sustainable funds in a SIPP, you will certainly be in fossil fuel companies. And, broadly, the industry thinks that’s ok – that most people don’t care about it. Are they right?

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About the author

About the author

Rebecca Jones

A financial journalist and communications consultant for nearly a decade, Rebecca has worked across national media, b2b, charities and for the UK’s most established sustainable investment team.