Vast majority of UK employees concerned about climate change, yet sustainable pensions are lacking

In collaboration with Make My Money Matter (MMMM), a new study by pension provider Scottish Widows has investigated employee and employer attitudes to climate change and green pensions. A ‘green’ or ‘sustainable’ pension is “a pension fund that aims to generate returns for savers via environmentally positive investments.”[i]

Their findings show that the UK workforce is highly engaged with the topic of climate change: eight out of ten employees (83%) view it as an important issue, whilst just over a third (34%) believe it is the most critical issue affecting society today[ii]. Yet UK pensions, which saw £3.2 trillion invested in 2020[iii], remain an area within which employers are failing to promote and seize the opportunities relating to sustainable investments. When employees were asked what they felt the benefit of investing in a “green” or “sustainable” pension is, most noted the improvement that it would make to the lives of future generations (41%), followed by the fact it could help save the planet (40%).

Maria Nazarova-Doyle, Head of Pension Investments and Responsible Investments at Scottish Widows, said:

“Pension funds have invested trillions on our behalf without ever asking the crucial question – do these investments create a world we actually want to live in? So much of pensions’ potential to do good is as yet untapped, but their investments could help drive innovation, cure disease, or even build homes and wind farms.”[iv]

Employers ‘missing a trick’ by not acting on pensions

Whilst 95% of HR decision-makers surveyed said that climate change is a very important issue, only a quarter of employers claimed to be knowledgeable about green pensions (25%), and concerningly almost a fifth of employers said that they did not know anything about them:

“FTSE100 pension schemes finance a staggering seven times more carbon than the emissions produced by those businesses via their operations, yet just 10% of those business include pensions in their sustainability plans. That shows that despite corporate efforts to be more sustainable, companies and savers have missed a trick by failing to act on their pensions” – Richard Curtis, Co-Founder, Make My Money Matter.[v]

MMMM also suggest that switching to a green pension is impactful in tackling the climate crisis, stating that it is 21 times more effective at cutting a personal carbon footprint than stopping flying, going vegetarian, and switching energy suppliers combined[vi].

Employees keen on green finance

Employers are also failing to note the importance of green pensions with their employees. The study found that green pensions are a priority for one in four employees (24%) and are recognised as one of the top four things that employees look for in a new employer – behind only flexible working policies (48%), support with the increasing cost-of-living (39%), and an attractive holiday package (34%). The findings suggest that with a third (32%) of workers seeking new employment right now and a further 24% applying in the next year, employers should strongly consider green finance as a way to recruit and retain talent[vii].

“Four out of five people seeking a new job stated that it is important to them that their prospective employer has strong policies on the environment or sustainability (82%). With the “Great Resignation” that has followed the pandemic, employers must meet the expectations of current and prospective employees, or risk losing out.”[viii]

There is also clear scope for transparency and education from employers, where seven in ten employees place importance on their employer investing their pension sustainably, yet just a quarter of those with pensions have checked where it is invested in the last year. Further, there is the suggestion that lower engagement with green pensions could be caused by misconceptions around them - a third of people earning £90-100k a year believing that green pensions yield lower long-term returns than ‘normal pensions’.

Additional disparities exist when comparing businesses by size. According to Scottish Widows and MMMM, 51% of companies in the UK offer sustainable options on their employees’ pensions, yet there is a considerable difference between large companies and small. Bigger companies are more likely to offer sustainable investments as part of their employees’ pensions (29%), compared with just 8% of small and micro businesses. This highlights the difficulty in driving green pensions across businesses. It could be suggested that smaller companies do not have the knowledge or resource to offer sustainable finance options to their employees. Yet if they are to compete with larger companies, these are options they will have to consider if they are to attract increasingly climate-conscious employees.

References

[i] Green Pensions Report - 2022 (scottishwidows.co.uk)

[ii] Green Pensions Report - 2022 (scottishwidows.co.uk)

[iii] UK: pension funds investments 2020 | Statista

[iv] Green Pensions Report - 2022 (scottishwidows.co.uk)

[v] Ibid

[vi] Ibid

[vii] Ibid

[viii] Ibid

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