Lots of people are doing the right thing these days: buying pensions and ISAs if they have spare cash. But do they check where the money is going?
I must admit that, even though I have my pension with a top provider, I am unsure whether it contains nasties such as armaments or fossil fuels. Part of the blame lies with many large companies who aren’t as transparent as they could be. When people find out where their money ends up, they are horrified.
Vegans may be investing in the meat industry. Medics in tobacco and climate activists in the worst-behaving fossil fuel companies. The Make My Money Matter campaign is urging us to engage with our pensions to change that.
They say that pension funds often invest money on our behalf into companies that do harm. Or supply chains that are unsustainable and industries that accelerate climate change.
They claim a more sustainable fund can have 27 times as much impact in reducing your carbon footprint than giving up flying and becoming a vegan combined.
Earth Day: What can we do?
The campaign calls for individuals to check their pensions are used to build a more sustainable planet.
Research from one of the largest workplace pensions schemes in the country, NEST Pensions, shows 70% of their members want ethical pensions. And, two thirds would forgo profit to know their investments are sustainable. CEO Helen Dean argues that the two aren’t mutually exclusive; members want their pensions to do both.
Richard Curtis, director of “Love Actually” and of Comic Relief fame, is a co-founder of Make My Money Matter. “If your money is invested in fossil fuels and other environmentally damaging practices, these are the industries of the past and you’re going to lose,” he says.
Performance statistics from Moneyfacts/Lipper Investment Management support that investing ethically makes sense not only from a moral point of view, but financially. Ethical funds have gone up 13.53% over one year to January 1, while non-ethical funds have gone up 5.15%.
The effect is even more pronounced over the long term. Yet more than half of Brits do not know if their pension is invested in line with their values.
Time for a change?
Interactive investor Great British Retirement Survey 2020, a consumer investment platform, found that more than half of the more than 12,000 respondents did not know if their pension is invested in line with their values.
“A pension pot is the most money many of us are ever likely to have to our names, so the lack of awareness around what it’s invested in and if these investments are in line with our values is shocking,” Becky O’Connor, Head of Pensions and Savings for Interactive Investor, says. “It’s hard to imagine this level of unawareness about anything else we commit our money to in life.
“The survey shows that interest in ethical investing in pensions is there, particularly among women and young people. The problem is that the transparency around where workplace pension money goes from providers is generally poor. The level of information given seems to assume that people are not interested, rather than that they are.”
Women and young people were among those least likely to know the way their pension is invested. As well as those with final salary/defined benefit pension schemes.
Not only should ordinary individuals not be afraid to ask their investment managers a few tough questions, but providers, including those paying out final salary pensions, should make this easy for us with regular updates of all their shareholdings on their websites, and detailed explanations of what these companies actually do.