Capital Markets Corporate

February 7, 2020

The one question that could spark a pensions revolution

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There’s a lot of noise around environmental, social and governance investing (ESG), so much so that little else was discussed at last month’s World Economic Forum in Davos.

To engaged retail investors and those working in the financial services industry, this noise is deafening. Yet amongst the majority of financial consumers, ESG remains an unknown acronym and yet another investment jargon term.

Make My Money Matter, a new campaign spearheaded by Richard Curtis of Love, Actually and Comic Relief fame could be set to change this and bring the merits of ESG investing to a mainstream audience and spark a pension revolution by asking everyday savers one simple question – ‘where is your money invested?’. A question millions have probably never stopped to think about.

Most savers in the UK don’t know how much is in their pension, let alone where it is invested. While we all strive to lead more sustainable lifestyles, many are unaware that their pension funds completely contradict the environmentally and social conscious lives they strive to achieve. An oncologist whose pension is invested in tobacco, an aid worker whose life savings are funding arms production.

With pension assets amounting to £6.1 trillion, driving increased engagement amongst consumers as to what their life savings are funding could see billions if not trillions on the move towards causes creating a more sustainable and positive world.

Pensions undeniably have an engagement problem. For years, the pension industry has lobbied individuals to engage with their pensions and take a greater interest in how much they’re contributing and earning, but to limited success. With the money locked away and managed by unfamiliar entities, many savers fail to engage with this asset or feel any real sense of ownership over it.

Helping savers to recognise that they can have a say in where their pension is invested and that doing so could help fund a better more sustainable world could spark the increased engagement in pensions the industry has been striving for so long to achieve. Increased engagement in where savers’ pension is being invested could in turn lead to greater awareness of other crucial aspects such as its value, while knowing it’s going towards good causes could even encourage savers to increase their contributions.

If ESG investing is to reach the masses, then simplicity will be the key to its success. The world of pensions and investing is overwhelming and confusing enough. Encouraging savers to reconsider where their assets are invested need not be complicated or overly engineered. A communications strategy should centre upon one simple question, ultimately asking savers does your pension practice what you preach?

 

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