Schemes need to pay attention to members’ sustainable demands

As rightly pointed out, the issue is complicated — from the perils of greenwashing, to decisions being made against the backdrop of climate risks that have not yet emerged.

In addition, the singular responsibility of looking after financial returns that fiduciaries and trustees are tasked with, is one factor driving this lack of openness to the idea that greener finance and addressing climate change may be a ‘good’ in and of itself, it was argued.

As was quoted: “Some trustees still think sustainability is for environmental campaigners.”

A pension, being inherently a longer-term consideration, seems much less risky and effortful when it comes to seeking a sustainable option when compared with other actions

What is becoming increasingly clear in our research, which focuses on customer behaviour and sentiment, is that sustainability is absolutely not just for environmental campaigners. It has become a mainstream concern, impacting everything from the food people buy, to the financial products they use, and perceptions of brands aligned with these.

Public sentiment research throughout the pandemic-driven turmoil of the past two years has shown that while people are glad to ‘get back to normal’, we have also been seeing people reconsidering how they live their lives — their habits, goals and priorities.

Trends are emerging that have a universality across the population. A desire for better mental and physical health, sustainability, addressing the climate crisis, and having a sense of balance and connection with friends, family and local communities are themes that are becoming universally important.

These individual aspirations do not always translate into easy behaviour change, but people are saying they want to do things differently, even if they struggle to ‘do’.

Savers want sustainable pensions

This is also filtering through into attitudes towards pensions. In a nationally representative survey with more than 2,000 consumers in October 2021, we found that 30 per cent of the population would prefer to be invested in a sustainable pension fund, even if it does not perform as well as an ordinary fund. If a sustainable fund was likely to perform better than an ordinary fund, 64 per cent would choose this.

Strikingly, however, 37 and 29 per cent respectively said they did not know the answer to these questions.

Which relates to another finding from the research — that understanding of pensions remains low. Half of those with a pension in our sample stated that they did not know where their pension fund is invested, despite 57 per cent stating they would like to know where it is invested.

On the one hand, this could come back to just how complicated the issue is. One argument could be that if the public understood the challenges and tensions inherent in making truly sustainable investments, perhaps their own choice for sustainable options would not be so clear cut.

Yet it can be hypothesised from our research into consumer psychology that it is precisely because it is complicated that people are likely to seek a more sustainable fund. This provides a way of feeling they do have some control over their pension in the context of understanding there are few guarantees in terms of how their pension will perform.

In choosing a sustainable fund, they have not had to tangibly change their lifestyle in the short term, and they gain the ‘halo’ effect of feeling they have made a more sustainable choice.

Other more sustainable options such as getting a new boiler or an electric vehicle tend to require more risk and outlay from the beginning. A pension, being inherently a longer-term consideration, seems much less risky and effortful when it comes to seeking a sustainable option when compared with other actions people are being asked to take to become more sustainable.

We have also found in our research that consumers increasingly expect even ordinary funds to be invested in sustainable options, with 47 per cent of the population agreeing that they would expect their pension provider to avoid investing in industries that contribute to climate change in all of their funds, not just those labelled sustainable.

There may remain tensions and challenges when it comes to trustees and fiduciaries seeing the sustainable options as good in and of themselves. 

However, in this time of flux, the public seem clear — feeling they have made the right choice is also a good in itself, and they realise there is little point in having a secure retirement without a secure society and environment in which to enjoy it.

Perhaps sustainability for its own sake should not be so quickly dismissed when it comes to prioritising members’ interests after all.

Carol McNaughton Nicholls is an associate partner at BritainThinks