Investing

How do pension investors really feel about responsible investing?

MoneyPlus Features Team

August 10, 2022

7 mins read

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I ‘only’ care about growing my money – that’s what one in three customers told us in a recent survey when asked about investing responsibly. But in the same study customers strongly voiced their desire to help tackle sustainable issues. For instance, 90% said protecting the environment is important to them. We look at the needs and sometimes diverse preferences of customers and what this means for the pension solutions we offer.

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Every few months we ask around 5,000 of our customers how they feel about their pensions and savings and the support they receive from us. Annually we also do deep dive studies into specific topics including responsible investing. It helps us keep track of how customers feel about investing generally and in relation to sustainable issues.

This year¹ uncovered a continuation of some trends but also a couple of surprises. So let’s get to the truth of the matter – how do customers feel about investing their money responsibly? Here’s a quick summary before we get into the detail:

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returns and risk continue to top the bill;
but the majority are also keen to make a difference;
there’s strong and perhaps surprising views on removing investment from a company;
women make more sustainable choices than men;
younger customers feel most strongly about sustainability – in this study;
many see the financial sense in investing responsibly;
most expect their pension provider to be investing responsibly.

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Returns and risk continue to top the bill

Growing your pension money (88% of customers) and protecting it from risk (81% of customers) are the top priorities when it comes to investing – with customers telling us these are extremely or very important. This has been the case for as long as we’ve been doing our various research.

In fact, a third of respondents agreed with the statement ‘I only care about growing my money’. No surprise here, after all this is why people save in the first place.

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But the majority are also keen to make a difference

The same study highlights that the majority want to avoid doing harm while aiming for that growth. And many signaled their preference to go further. 70% consider it important to be investing in a way to positively influence change in industries that need to improve their impact on society or the climate and their approach to corporate governance (a company’s management and processes; factors such as board diversity and structure, tax strategy and salaries).

Meanwhile 64% consider it important to invest in a way that commits to net zero carbon emission status by 2050 (or earlier).

Climate change and human rights continue to top the list when it comes to the responsible investing factors that matter most; another pattern we’ve seen for a number of years.

As we cover later on, the good news is that many customers are recognising that you don’t need to choose between aiming for growth and doing the right thing for people and the planet.

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A strong and perhaps surprising view on removing investment from a company

A third of respondents consider it important to exclude companies or industries that have a negative impact on society, have poor corporate governance or are damaging the environment – even if they intend to change this in the future.

However, other research we’ve conducted tells a different story. In a 2021 study² we asked customers what they would expect to happen if a company our investment managers invested in had an unacceptable sustainability record. Only 14% said that they’d want us to pull that investment out altogether, but 64% said they’d like us to either continue investing or to work with the company to help them change for the better.

It’s a dilemma, certainly on the surface. Surely it makes sense to disinvest from a company with poor environmental, social and governance (ESG) standards or those involved in say oil and gas production? But by staying invested we can use our influence as a large investor to help companies transition to zero-carbon business models, improve employee rights and other practices. Doing so is called Stewardship and it’s a core part of our responsible investment approach.

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Women make more sustainable choices than men

Attitudes towards sustainability are much more positive among women — a trend we’ve seen reported in other research studies.

Women are more likely than men to recycle, buy sustainable products and choose a sustainable diet. When it comes to investing, good corporate governance and social responsibility of the companies they invest in, as well as the impact of climate change are more important to women than men.

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Younger customers feel most strongly about sustainability – in this study

‘Only younger people care about being sustainable and investing responsibly’ – it’s a belief that’s persisted for years. Certainly our most recent study finds that 18 to 44 year olds attach more importance to excluding companies that have a negative impact and investing in a way that influences positive change and commits to net zero targets.

However, we’ve seen this fluctuate over recent years with our own and external studies suggesting that aspects of responsible investing are becoming more important to all age groups.

Just because the younger age groups care about sustainability doesn’t mean they don’t want those returns. In fact, the youngest customers ranked returns way above ESG factors when it came to decisions about where their money is invested.

But it seems that overall many see that aiming for sustainability doesn’t have to come at the expense of returns…

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Many see the financial sense in investing responsibly

Many customers understand that how a company manages its ESG factors can affect its potential growth over the long term.

In fact, 81% of customers recognise that it makes financial sense to consider such factors, while 72% agree that a company’s management of its ESG behaviour will affect its future financial performance. Please note, these are personal views of our survey respondents only and not actual returns or a forecast of future returns.

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Customers expect their provider to be investing responsibly

Since our last responsible investing research, we’ve seen a gradual increase in customer expectations that their pension provider is doing the right thing on their behalf. For instance, 78% of customers expect Standard Life already considers responsible investing when choosing where to invest on their behalf. And a similar number just want us to take care of it for them.

Importantly, these expectations are not just in relation to funds labelled as responsible or sustainable – 84% of customers cite the importance of considering how responsible ALL types of investments are.

What can we take from it all?

The latest research shows a similar story to the last few years – views vary considerably. Some customers care ‘only’ about the return their pension investments are making, while the majority also want to avoid doing harm and to make a difference if they can. And they expect their provider to be taking care of this for them.

Then there’s a smaller group of customers with more specific requirements such as screening out certain types of industries, or supporting specific themes such as biodiversity, water resources or natural food production.

What it means for what we offer

Our duty to our customers is to help them grow their pension savings while also helping to secure a sustainable future we can all retire into.

To meet the majority of customer needs and preferences we offer easy default solutions with the primary aim to improve pension pot returns over the long term, but that also have a clear strategy to invest responsibly. Investment experts pick and manage funds for you, aiming to manage the financial risks and opportunities of ESG issues.

Alongside this we also offer a choice of individual funds for those customers who want to target specific ethical, environmental and social goals together with aiming for growth over the long term.

Find out more

If you have a Standard Life pension plan, you can easily check where you’re invested by logging in or registering for online services.

Making changes to your pension plan and its investments is a big decision and could impact how much you’ll have in the future. You may want to take professional advice before making any decisions. If you don’t have a financial adviser, you can find a list of advisers on the FCA website. Unbiased is an independent site that can help you find the right adviser for you. There’s likely to be a charge for any advice you receive.

You can find out more about responsible investing and sustainability in our articles A beginner’s guide to responsible investing, Aim to grow your pension pot and do good – is it really possible? and If you want to grow your pension it’s crucial to consider climate change.

The value of investments can go down as well as up and may be worth less than what was paid in.

The information here is based on the understanding of Standard Life in July 2022 and shouldn’t be regarded as financial advice.

Sources

¹Standard Life Responsible Investing Research Report, Q1 2022. Random sample of customers with 1600 responding.

²Source: Standard Life Customer Quest Q2 2021 Research Report