8 ways your pension can make a difference

Here are eight things you can do to ensure your pension is investing in funds and causes with environmental, social and governance factors in mind


ESG pensions

More and more of us are taking a coffee flask to work, ditching fast fashion or becoming vegan. But how many realise that most of our £3-trillion pension money in the UK is invested in industries such as oil, weapons and tobacco? We can change this. By taking practical steps towards a pension fund that focuses on environmental, social and governance (ESG) factors, we can invest in a positive, impactful way and not lose out on financial performance.

1. Define what ESG investing means to you

ESG is not a one-stop shop; it can cover everything from a company’s carbon footprint to its anti-sexual harassment policy. You may want to avoid tobacco, alcohol and pornography. Or perhaps you are vegan and want to screen out meat production. In a sea of options, you need to understand what your priorities are, but no one ESG pension fund will tick every box. Use independent, online ESG ratings tools to find a pension provider and product that matches your values.

2. Ask what you are invested in

Whether you have a workplace or private pension, log on to your online account or dig out the annual statement. Look at the underlying investments and how much it’s costing you a year. “The vast majority of pension money is in the standard, ‘default’ fund so it’s really important that these default funds shift to being more sustainable,” says Tony Burdon, chief executive of Make My Money Matter. “In the meantime, the bulk of pension investment is causing harm to the planet.”

Most pension money is in the standard, ‘default’ fund so it’s important these default funds shift to being more sustainable

3. Discuss ESG investing options

What could the alternative be? “If you’re in a workplace pension, ask your human resources department about it. Write to your provider too and ask for a sustainable or a net-zero pension,” says Burdon. “It can be hard for individuals and you might not get a good answer at first, but you just have to keep pushing.” Make sure, however, that your employer is on board and you will not lose out on their pension contribution – a minimum of 3 per cent of your salary – if you choose another fund, even if it’s with the same provider.

4. Research the ESG pension fund provider

Your pension fund might be an ESG option, but also look at the product provider. “Who is providing that fund and are they committed to ethical investment?” asks Olivia Bowen, chartered financial planner and partner at Castlefield. “Ideally you want more than one ESG fund on offer so you can be reassured it’s not tokenism. You might also want to choose a fund manager who engages with companies he or she invests in – this is called stewardship – and it should be advertised on their website.” Another tip is to check if the ESG team at the pension provider is a core part of the fund management team and if the pension provider is a signatory of the United Nations’ Principles for Responsible Investment.

5. Campaign for change

It’s time to act. Sign the Make My Money Matter petition, speak to your colleagues, arrange a meeting with your boss and write to the provider directly. Educate others on the positive impacts of ESG pension funds, for example moving your money to an ESG pension fund can be 27 times more effective at reducing your own carbon footprint than going vegan and avoiding planes. “We know from public surveys that the majority of people would save more in their pension if they knew it did good,” says Burdon at Make My Money Matter. “Don’t wait. Your money is having an impact every day it’s invested.”

6. Get financial advice on ESG

Somewhere along the way, you may need financial guidance from an independent financial adviser (IFA) who has a special interest in ESG. “If you want to get an extremely well researched portfolio, which can align with your moral values and attitude to risk, going to an IFA is the only way you can get this quickly,” says David MacDonald, founder of The Path, a financial advisory firm. “But choose carefully as research shows that a minority of IFAs feel confident advising in this area.”

7. Switch to an ethical option

It’s much easier to switch pensions if you work for yourself, but there are some golden rules. Firstly, make sure you don’t lose out on any benefits, especially if the pension you’re switching out of is more than ten years old. Secondly, find out what the current value and transfer value is and whether you’d lose money when switching. Thirdly, check if there are any additional costs. “In most cases, switching a fund or to another provider should be easy and you can do it online,” says Castlefield’s Bowen. “But it’s always a good idea to get financial advice.”

8. Monitor the growing market

Share Action found that 89 per cent of the largest asset managers in the world now offer some sort of ESG investing option. Might another fund or provider be cheaper and more closely aligned with your values in the future? “ESG investment is a fast-moving world and has become more or less mainstream,” says The Path’s MacDonald. “Fund managers and providers are launching ESG funds every week, so it’s a good idea to look at new entrants to the market.”


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