Members have clear financial goals alongside a range of responsible investing preferences, according to our ongoing customer research. So how can you meet the needs of all?
Delivering growth and managing risk remain the top priorities for customers when asked about investing responsibly.
But these are closely followed by a strong desire to avoid harm while aiming for that growth, to help tackle sustainable issues and to meet net-zero targets.
The large majority of customers expect their pensions to be invested responsibly. Meanwhile there's a smaller group of customers keen to align their investments to specific ethical views, or explore the potential growth opportunities of specific sustainable themes.
These are the findings of our annual customer responsible investing research1. They highlight a considerable range of requirements, especially alongside the increasing environmental, social and governance (ESG) regulatory burden on schemes and trustees.
How can we help
At Standard Life, it means offering a growth-focused sustainable default solution which aims to meet the majority of member needs, clear commitments to net-zero targets, and a range of self-select options for members with more specific goals.
It also means being ready to adapt. This is why we've designed our default to allow us to respond to evolving regulatory, market and member needs.
Meeting the needs of the majority
Our flagship default Sustainable Multi Asset Universal Strategic Lifestyle Profile aims to give members the income they need in retirement, by focusing on a range of ESG factors that can positively or negatively affect returns. We avoid taking specific ethical and/or moral stances on issues, which may or may not be in harmony with members' individual values.
We use predominantly passive, index strategies - customised indices that only invest in companies meeting certain sustainable criteria. Using a blend of exclusions, tilting (increasing or decreasing investment in a particular company) and stewardship, it's possible to avoid sustainable risks, tap into opportunities while also helping to improve sustainable outcomes.
We have also set clear targets that aim to:
- reduce carbon intensity (a measure of the carbon emissions of all the companies invested in) by 50% compared to the parent index
- increase green technology revenues by 50% compared to the parent index
- enhance ESG scores by 10% - 20%
Although we're concentrating on delivering the financial priorities for the majority - which are returns and managing risk - we also touch on the big responsible investing factors they care about. This includes avoiding harm, driving change for the better and helping to address climate change - factors our ongoing research highlight as important.
Catering for specific needs
For members with more specific values-based requirements we offer a full responsible range of over 30 funds for contract-based schemes.
These include our newly launched Sustainable Focus range, a social bond fund, climate and gender diversity funds, a Shariah fund and other ethical and impact investing options.
Our Master Trust pre-approved range has access to the Sustainable Focus range, plus Shariah, ethical, and sustainable index funds.
Clear commitment to net zero
Delivering the right financial outcomes for members comes alongside helping to secure a sustainable future for all of us to retire into.
Overarching our default and self-select options is our clear corporate commitment, as part of Phoenix Group, to addressing sustainability . This includes targeting net-zero carbon in our investment portfolio by 2050, with interim targets of a 50% reduction by 2030* and a 25% reduction by 2025*.
From climate change to human rights, we're in a world where pensions need to work even harder. They need to consider the financial implications of such ESG issues, while also helping to improve them.
For most members the priorities remain growing their money and managing financial risk to help deliver the income they need in retirement.
But increasing awareness of ESG issues also means they want their pension to be invested responsibly, to avoid causing harm and to drive change for the better.
The good news is that these needs and preferences go hand in hand. Investing responsibly makes financial sense while also helping to drive a broad improvement in sustainability.
At Standard Life, we offer a range of different investment options that aim to help you deliver the right financial outcomes for your members, while also helping to create a sustainable future they can retire into.
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 2022 and shouldn't be regarded as financial advice.
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1Standard Life Responsible Investing Research Report, Q1 2022. Random sample of customers with 1600 responding.
*This will cover all listed equity and credit assets where Phoenix Group can exercise control and influence.