Some member views on responsible investing are changing
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People care how their pensions are invested. They have clear financial goals and strong views on sustainability – but strength of feeling about some issues is changing.
A considerable majority have high expectations that their pension provider invests responsibly on their behalf, influencing positive change and excluding companies that have a harmful impact on people or the planet. Women continue to feel more strongly about sustainability than men. But views across the generations are becoming more aligned.
These are some of the findings from our ongoing research into the varying needs and preferences of our customers when it comes to responsible investment and their pensions. Ultimately, it helps to inform how we design your pension solution and how we communicate about it to your members. And, as you’ll discover in our findings, people do want to find out more – making responsible investing a way to help improve engagement.
Peoples’ investing priorities are clear
Returns, managing financial risk and good corporate governance are increasingly the top investing priorities for those surveyed. The importance of all three factors has edged up since 2020.
Figure 1:
The importance of each factor when choosing where to invest, ranked as either very important or extremely important.
| 2020 | 2022 | 2023 | |
|---|---|---|---|
| Return | 86% | 88% | 89% |
| Financial Risk | 82% | 81% | 84% |
| Good corporate governance | 77% | 77% | 79% |
| Social responsibility of the companies we invest in | 60% | 61% | 59% |
| Impact on climate change | 57% | 54% | 52% |
Strength of feeling about some sustainable issues is changing
When it comes to responsible investing, climate change and human rights remain the top issues people want us to consider. But notably, strength of feeling about these issues has dropped slightly (see Figures 1 and 2). Meanwhile, it’s increased slightly for energy and water resources. Natural food production and clean fuels are also up, having both fallen slightly in 2022 (see Figure 2).
What we’re seeing overall is perhaps a reflection of many people feeling weary after several years of economic and social uncertainty. The majority still care about driving a more sustainable future; protecting the environment is important to 89%, while 75% say they try to live their life sustainably. But ultimately, they’re having to focus on day-to-day financial challenges and issues affecting the here and now, like energy, rather than what they consider to be ‘further off’ issues like climate change.
Figure 2:
Most important responsible investment issues
| 2020 | 2022 | 2023 | |
|---|---|---|---|
| Climate change | 66% | 62% | 59% |
| Human rights | 55% | 58% | 52% |
| Recycling | 43% | 40% | 41% |
| Clean fuels | 45% | 39% | 41% |
| Energy conservation | 40% | 39% | 41% |
| Equal opportunity and pay | 35% | 37% | 36% |
| Water resources | 32% | 31% | 36% |
| Employment practices | 32% | 30% | 29% |
| Animal causes | 23% | 25% | 25% |
| Natural food production | 25% | 21% | 25% |
People expect their provider to invest responsibly
Alongside returns and the management of financial risk, most survey respondents want investments that avoid causing harm and support positive change. And they expect their provider is taking care of this.
-
81%
I just want my pension provider to take care of it for me and invest responsibly on my behalf – up from 79% in 2022 -
85%
My priority is growing my money but I want to avoid harm if I can – up from 84% in 2022
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After an increase in 2022, expectations of our business in terms of influencing sustainable practices returned to 2020 levels. As mentioned earlier, perhaps this is down to a degree of lethargy about wider issues, when people are faced with more pressing personal financial concerns.
Having said that, it’s clear that the majority still expects us to use our position as a large investor and encourage companies to improve their impact on the environment and society. Driving positive change, avoiding investing in companies that have a negative impact, and committing to net zero are all considered to be either very or extremely important.
More people are seeing the financial reasons to invest responsibly
While 'doing the right thing' to help tackle sustainable issues may be fuelling some preferences, our research suggests that many are also making the financial connections.
For instance, 80% recognise that it makes financial sense to consider ESG factors. And 68% agree that a company's management of the ESG-related risks and opportunities 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.
Differing views between genders, levelling out between generations
More women than men say they care about good corporate governance, the social responsibility of the companies invested in, and the impact of climate change.
Concerns about sustainable issues don’t just impact views on investments – they carry into other areas of their lives. For instance, women say they’re more likely than men to choose a sustainable diet and to avoid buying products linked to unsustainable practices. And their strength of feeling about these behaviours has increased slightly since 2022.
However, while last year’s report showed younger people also felt more strongly about sustainability, we’re seeing this level out across the generations, with one exception: how they feel about net zero when it comes to responsible investing (see Figure 3).
Figure 3:
Importance of responsible investment approaches, ranked as ‘extremely important’
| 18 - 34 | 35 - 44 | 45 - 54 | 55 - 64 | 65+ | |
|---|---|---|---|---|---|
| Excluding companies or industries that have a negative impact | 34% | 28% | 33% | 36% | 33% |
| Investing in a way to positively influence change in industries | 32% | 29% | 30% | 31% | 28% |
| Invest in a way that commits to net zero | 35% | 28% | 26% | 27% | 27% |
There’s appetite to know more, but complexity remains a barrier
Almost six in ten people want to find out more about responsible investing, a view that’s higher among younger and female respondents.
However, not knowing where to look, complexity, and simply not having the time, are stopping them doing so. We need to help change this – especially as only a quarter have a good idea if their current investments have an ESG approach applied to them.
How we’re responding to the research
It’s likely that your members are worried about their own future and that of the planet. But it may be that the cost-of-living crisis and higher interest rates are depleting their ability and energy to engage with their pensions and the sustainability challenges we all face. We need to offer solutions that help to make saving for the future easier.
- To meet the majority of member needs and preferences, we offer easy investment options. These aim to deliver good member outcomes, and they’re designed to consider some ESG issues as part of that.
- Alongside this, we also offer a choice of individual funds for those members who want to target specific environmental and social goals (important to 44% of our survey respondents) together with aiming for growth over the long term. The full range includes impact and thematic funds (focusing on specific themes, such as climate or gender), and those where consideration of ESG issues is integrated into the design and management of the fund.
- We know people want to understand where their responsible investments are invested (64%) and how these are performing (69%). That’s why we’ve improved our reporting factsheet for our core investment growth option. As well as showing high-level asset allocation and performance, it shows company exclusions and how it’s performing against its ESG targets.
- Members can also access simple educational content such as jargon busters.
- Or find out how we’re influencing positive change with our approach to stewardship.
This is a journey, as we all work towards solutions to support longer retirements alongside addressing the sustainability issues we all face. That’s why we’ll continue to research and innovate as we all strive towards a better future.
Find out more in the full Responsible Investing Viewpoint 2023 report
Along with the pensions industry, we’re on a journey to becoming a net zero business by 2050. Our first priority is to support a better financial future for our customers, but we want to support wider, impactful change at the same time.
To do this, we’re taking actions we think can help to tackle the climate crisis and manage financial risk for our customers. We’re thinking carefully about where we invest in carbon-emitting sectors and engaging with those contributing the most to the climate crisis to encourage real change.
Find out more about our Net Zero Transition Plan
It's important to note that Standard Life is part of Phoenix Group, so the data shown is for all the Phoenix Group brands combined.
Find out more about responsible investing
Read about our approach to responsible investing and our off-the-shelf default investment option.
Use our jargon buster to help your members discover the potential power of their pension.
The value of investments can go down as well as up and may be worth less than what was paid in. Past performance is not a guide to future performance. The information here is based on the understanding of Standard Life in August 2023 and shouldn't be regarded as financial advice.