Master trusts have been urged to introduce more impact investing options, after research from Hymans Robertson revealed that 42 per cent of master trusts don’t offer climate impact options to members and have no clear plans for their inclusion.

This is despite previous research from Hymans Robertson in 2021 suggesting that nearly a third (30 per cent) of defined contribution (DC) savers want more environmental, social and governance (ESG) investment choice.

However, the latest DC Master Trust Default Fund Review’ showed that some progress has been made, as while Hymans Robertson estimated that less than 4 per cent of defined contribution (DC) savers had a climate investment option in 2021, this has increased to around 10 per cent of DC savers in 2022.

In addition to this, the report revealed that an "encouraging" 11 per cent of master trusts are planning to introduce impact investment as part of their offering, while two of the master trusts surveyed are going further, by making provision in their default arrangements.

Hymans Robertson argued that there is a "compelling case" for making impact investing options available to DC members, suggesting that this can drive a "significant" improvement in both member outcomes and sustainability by including such options.

In light of this, the firm has urged master trust trustees to introduce more impact choices, and form a policy for impact investing for their master trust.

Hymans Robertson also encouraged those who already have impact options to consider how they might improve member engagement in this choice.

More broadly, the report provided insight into the provider performance in the three years to 30 June 2022 and the impact on member outcomes in each phase.

This analysis indicated that while member outcomes generally held up well during the pandemic, they are now under pressure from other factors, such as the war in Ukraine, the cost-of-living crisis and recent turmoil in bond markets, suggesting that the impact of this is likely to be seen in future analysis of default strategies.

Hymans Robertson head of DC provider, Claire Roarty, commented: “DC master trust members are demanding more from their funds with nearly a third of members expressing a desire for investment options which offer positive environmental and social impacts.

“We launched the Climate Impact Initiative in 2021 to meet these demands and more DC savers than ever now have access to impact options.

"However, there is much work still to do and 42 per cent of master trusts don’t offer impact investing options to members and have no plan for their inclusion – creating a gap between what members want and what the market offers.

“With the DC market continuing to grow, it is imperative that providers put plans in place to introduce an impact choice and communicate this to their members.

"Improving member engagement must remain a key priority, particularly in the current market where longer-term savings like pensions can slip down the agenda. Providers must do all they can to encourage better retirement planning before it’s too late.”

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