People are becoming more interested than ever in sustainability and the environmental, social and governance (ESG) standards of the companies they buy from and invest in. As a member of a workplace pension, you too are an investor. Just like you can make lifestyle choices with the environment in mind, like recycling and reducing your carbon footprint, you can also make sustainable choices for your pension.
What is sustainable investing?
We use the term ‘sustainable investing’ to encompass ESG issues and related topics. ESG stands for Environmental, Social and Governance. Analysing ESG factors can be a way to assess the sustainability and social impact of an investment in a company and to identify risks. Fund managers can incorporate this information into their investment process. Some of the things that might be considered are:
- Climate change
- Greenhouse gas (GHG emissions)
- Resource depletion, including water
- Waste and pollution
- Loss of biodiversity
- Working conditions, including slavery and child labour
- Local communities, including indigenous communities
- Conflict regions
- Health and safety
- Employee relations and diversity
- Executive pay
- Bribery and corruption
- Political lobbying and donations
- Board diversity and structure
- Tax strategy
- Minority shareholder rights
What about sustainable investing and my workplace pension?
As a member of a workplace pension you and/or your employer are contributing to your pension savings account each month. When you save into a pension plan, your pension savings are invested into funds. As a member of the pension plan this makes you an investor, and you can decide where your contributions are invested. You can opt to invest in the default investment option, or you can choose to self-select funds.
The Board of Directors through its Investment Committee carefully monitors the funds that are offered through the FEPP. We expect the fund managers we work with to outline how they assess companies on ESG factors. In addition, we require fund managers to measure the effectiveness of their strategy in terms of how it benefits members of pension schemes and other investors.
Read more about our engagement policies and those of our Fund Managers:
- Read Fidelity's Shareholder Engagement Policy
- BlackRock Life Limited Engagement Policy
- Pimco Europe Limited Statement in Relation to the Shareholder Rights Directive II
- T. Rowe Price Engagement Policy
Whether you are investing via your scheme's default investment option or you are choosing your own funds for your workplace pension, you can find out more about the funds you are invested in by reading about the investment objectives in fund documentation.
Are there different ways of investing sustainably?
There are different approaches to investing sustainably - you might invest in funds that avoid certain activities or industries altogether. Others see sustainable investing as a more proactive approach, where companies make a positive difference and act as voice for change. Finally, you can look at companies in each sector with the strongest ESG credentials.
Are sustainable funds a risky investment?
All investments come with a certain degree of risk. Investment risk to you as an investor is simply that you may not achieve your intended financial goals.
Just how much risk you're prepared to take is likely to be influenced by a number of factors, including:
- your investment goals
- the timescale over which you are investing
- whether you require income from your investment or want to grow your portfolio
- the type of investment and the level of risks that suits you.
The fund factsheets on PlanViewer break down the level of risk so you can choose what is right for you and what you feel comfortable with.
And what about climate risk, specifically?
We recognise that climate change poses one of, if not the most, significant risk to the long-term profitability and sustainability of companies, including our own. We are de-carbonising in a number of ways:
- Propriety ratings – as an asset manager we use these to identify companies exposed to climate risk, whether physically or from increased regulations. We then engage with companies to manage risks.
- Participation in global programmes – such as Climate Action 100+ initiatives that push large emitters towards more sustainable business models.
Busting sustainable investing jargon
Our ‘jargon buster’ can help you understand common sustainable investing terms.
Check your investments
It’s a good idea to regularly assess where you are invested to make sure your fund choices align with your values and overall retirement savings goals. Check where your pension is invested by logging into PlanViewer.
Important information - Investors should note that the views expressed may no longer be current and may have already been acted upon. The Investment Manager’s focus on securities of issuers which maintain sustainable characteristics may affect the fund’s investment performance favourably or unfavourably in comparison to similar funds without such focus. The sustainable characteristics of securities may change over time. No representation nor warranty is made with respect to the fairness, accuracy or completeness of such credentials. The status of a security’s ESG credentials can change over time. This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to an authorised financial adviser.