Climate change, resource scarcity and human rights – just some of the huge sustainability issues that we consider when we invest your pension money. More than half of our customers told us they want to know more about this, so as part of Pension Engagement Season, we’re sharing key points and top reads.
Your pension pot is money invested in a mix of different companies, industries and countries, with the aim of growing its value over the long-term.
How a company in any industry, in any country, treats say the environment and its employees, can have an impact on its financial performance. In turn, that can affect how much value it could remove or add to your pension pot.
In other words, there are strong financial reasons to consider sustainable issues when it comes to your pension investments.
MANAGING RISKS AND AIMING FOR GROWTH
Companies face risks if they fail to take sustainability seriously. And there’s a lot to think about from waste disposal and energy use, to supply chains, and how they treat employees and local communities.
If companies breach rules around these areas it could result in fines, damage to their brand reputation, plummeting demand and a falling share price.
As we move to a low-carbon economy, some companies could see their assets become ‘stranded’ – what’s called transition risk. This can happen through a lack of demand for their products or support from investors, or failing to adapt to regulatory change.
So while companies involved in fossil fuels, such as energy companies, may perform well in the short term, they face challenges as we move to a low-carbon future.
On the other hand, good management of environmental, social and governance (ESG) factors can support a company’s brand and financial performance over the long term. Meanwhile companies coming up with solutions to sustainable issues and challenges may offer growth opportunities in new markets.
WHAT DO OUR CUSTOMERS REALLY THINK ABOUT ALL THIS?
Growing their pension and protecting it from risk are their top priorities. But the majority also want to avoid causing harm and to help address sustainability issues. This is what customers are telling us in our ongoing responsible investing research1. Discover the highlights in How do pension investors really feel about responsible investing?
Making changes to your pension plan and its investments is a big decision and could impact how much you’ll have in the future. You may want to take professional advice before making any decisions.