Pensions industry urged to educate members on ESG investing

Aegon has called on the pensions industry to improve communications with members as to how environmental, social and governance (ESG) investing works, and to highlight its potential benefits.

The call follows research conducted by Aegon, which found that just 15 per cent of pension savers said they invest in ESG funds, despite 77 per cent saying climate change was an important risk to consider when investing.

Aegon suggested that this gap highlighted a “disconnect” between people’s beliefs and the way they invest their savings.

Investments in ESG funds seemed low in comparison to saver’s other efforts to support a sustainable society, with it featuring at the bottom of the list of efforts surveyed.

By comparison, 95 per cent of respondents said they recycled, 59 per cent avoided single-use plastics and 36 per cent were eating less meat.

When analysing what would help people make more sustainable investment choices, 50 per cent of respondents said they would like more information to help them understand.

Furthermore, 43 per cent wanted clearer labelling, 39 per cent wanted more ESG investment choice, and 45 per cent wanted better communication on the benefits and impact of ESG investing.

However, Aegon noted that there were signs that ESG investments were gaining traction, citing figures showing that UK savers’ pensions being invested in ESG funds had reached almost £1bn in 2020, a 66 per cent year-on-year increase.

‘It’s clear few people understand what is meant by ESG investing and that’s not surprising given that within the investment industry there are debates about what it constitutes,” said Aegon managing director of investment solutions, Tim Orton.

“At the moment, it’s the more tangible day to day acts like recycling and avoiding single use plastic that people think of when considering how they’re contributing to a more sustainable planet.

‘But the reality is many people will now have a proportion of their pension in ESG strategies – although they may not be aware that this is the case. The industry has a role to play in communicating how ESG investing works and to spell out the benefits of investing in this way.

‘Over the long term, investing in a sustainable way can have a meaningful impact on how businesses are run and how they interact with society and the environment. It can also have a positive impact on the value of people’s savings.”

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