A key factor determining the potential growth of sustainable business, is the material backing of institutional investors such as pension funds. With this being the case, and many pensioners no doubt wanting their hard-earned money to be invested into companies helping society, it seems odd that over half of Brits don’t know whether their pensions support businesses who are in keeping with their moral values.
According to Interactive Investor’s Great British Retirement Survey, 53% of 12,000 respondents said they didn’t know whether their pension had been invested in line with their values.
On the whole, women and younger people are seen to display greater interest in ethical investing themes. Around 36% of survey respondents said that despite not intentionally investing in ethical themes, they would be interested in doing so. Overall, youngsters were the most keen to get involved, with 61% of 18-23 year-olds and 59% of 24-29 year-olds interested in sustainable investment opportunities.
As age increases, interest appears the decrease. The least interested in new investment themes seem to be the oldest groups, with only 27% of 72-77 year-olds and 26% of over-77 year-olds saying they would like to invest ethically, with 54% and 57% respectively saying they would not be interested at all. In terms of gender differences, 42% of women and 32% of men said they would like to be able to invest ethically.
In terms of knowing where their pensions are being invested, 66% of women, 63% of those under 42, and 56% of those on defined benefit schemes had no idea where their retirement pot was being spent. When asked whether workplace pensions should offer ethical investments as a default option, younger people (65% of those aged 18 to 23 and 54% of those aged between 24 and 29) and women (42%) were most in favour.
Of course, as rising ethical investment firms – such as Tickr – are showing, is that sustainable businesses are now offering returns in line with or ahead of market rates, with the company noting 400% revenue growth from its investments during the lockdown period. Similarly, oil companies such as Shell and BP continue to expand their renewables offerings, while central banks look to target QE towards greener companies.
In sum, pensions should be geared more heavily towards moral values, and ethical investment. These themes aren’t just more emotionally fulfilling, but are offering above-market-rate returns. To miss out on their growth wouldn’t just be ignorance, it would be masochism. And investing pensions in ethical themes is the perfect way to make money, while making a difference.
Speaking on the research findings, Interactive Investor Head of Pensions and Savings, Becky O’Connor, commented: “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 whether these investments are in line with our moral values is quite shocking. It’s hard to imagine this level of unawareness about anything else that 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.”
This week, interactive investor unveiled its new longer list of ethical funds – the ACE40 range, giving ethical investors using the platform greater choice.