What does sustainable investment mean for pension schemes?
Sponsored Content, Mike Freer, of BWCI, replies:
‘LEAVE the oil in the soil, the coal in the hole.’
Having plundered the Earth’s resources for decades, things are now looking bleak. UN Secretary-General António Guterres described the latest IPCC report as ‘cataloguing the empty pledges that put us firmly on track towards an unliveable world’. Investment decisions that ignore sustainability of the Earth’s ecosystem must change. What does this mean for pension schemes?
Equity funds are common investments in DC pension schemes.
We might expect investments in low-carbon sectors, such as technology, to fare much better than those in fossil-fuel extraction, for example. Significant amounts of fossil fuels must stay in the ground if the global-warming targets are to be met. DC scheme funds that hold such ‘stranded assets’ are exposed to falls in value.
UK government bond funds may benefit from their safe-haven status at the expense of corporate bond funds; there are now green gilts available, too.
Active and passive managers are finding different solutions to these challenges. The situation is developing quickly, and expert assistance is frequently required to help trustees avoid greenwashing (misleading climate claims).
The power of pension investment
Members of DC schemes rely on having suitable investment options provided by their occupational pension, especially in the default option, where most are likely to be invested. Does your scheme have this, or other suitable options?
The relevance of pension schemes investment was highlighted by Richard Curtis’s Make My Money Matter initiative, where suitable changes to a member’s pension investments were calculated as having about 27 times the effect of becoming a non-flying vegan.
DC scheme fund selection can make a real difference to retirement benefits, and a material contribution to achieving net zero. Why not take action to check whether your pension scheme is hindering or helping Earth’s sustainability?