Climate change, resource scarcity and human rights – how a company manages huge sustainability issues like these can affect how it performs and the returns (value) they deliver to you, the investor. Discover the link between sustainability and the money in your pension pot.
How a company in any industry, in any country, treats say the environment and its employees, can have an impact on its financial performance. In turn, that can affect how much value it could remove or add to your pension pot.
In other words, there are strong financial reasons to consider sustainable issues when it comes to your pension investments.
Managing risks and aiming for growth
Companies face risks if they fail to take sustainability seriously. And there’s a lot to think about from waste disposal and energy use, to supply chains, and how they treat employees and local communities.
If companies breach rules around these areas it could result in fines, damage to their brand reputation, plummeting demand and a falling share price.
As we move to a low-carbon economy, some companies could see their assets become ‘stranded’ – what’s called transition risk. This can happen through a lack of demand for their products or support from investors, or failing to adapt to regulatory change or to changes in consumer behaviour and the economy.
So while companies involved in fossil fuels, such as energy companies, may perform well in the short term, they face challenges as we move to a low-carbon future.
On the other hand, good management of environmental, social and governance (ESG) factors can support a company’s brand and financial performance over the long term. Meanwhile companies coming up with solutions to sustainable issues and challenges may offer growth opportunities in new markets.
It makes sense for investment managers to consider such risks and opportunities when they decide where to invest your pension money – and to encourage these companies to maintain high ESG standards going forward (known as stewardship).
This is going on behind the scenes of our Standard Life easy default pension solutions; it’s what we call responsible investing.
Helping to build a more sustainable future to retire into
While our main focus is on the financial aspects – after all our duty is to help you save for your retirement – we’re also supporting a more sustainable future for you to retire into. In fact, these two aims go hand in hand.
How we consider climate change is of course a huge part of this. The good news is that you don’t have to choose between aiming to grow your pension and tackling the climate crisis – find out more in Investing in our planet could also make sense for your pension.
As part of Phoenix Group, Standard Life is taking action to invest in the future we all want. We've set clear targets to help fight climate change and to drive tangible change towards a low-carbon economy. You can read more about Standard Life’s commitment to sustainability and responsible investment and the Group’s sustainability commitments.
Check where you’re invested
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.
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 March 2023 and shouldn’t be regarded as financial advice.
1Standard Life Responsible Investing Research Report, Q1 2022. Random sample of customers with 1600 responding.