Member support for ESG 'plateaus' as pension saver awareness issues persist

The growing enthusiasm for environmental, social and governance (ESG) issues may have plateaued over the past year, with industry research suggesting that defined contribution (DC) pension savers' views may not be translating into their pension investments.

The survey from the DC Investment Forum (DCIF) and Ignition House revealed that 87 per cent of DC pension holders believed that businesses had a wider social responsibility than simply making a profit, equal to the level seen in 2020.

Over four in five (81 per cent) said that it was important to protect the vulnerable in society, a slight drop on the 83 per cent recorded in 2020, whilst 68 per cent felt strongly that businesses should control executive pay, compared 71 per cent in 2020.

Those who felt strongly about environmental issues also fell slightly from 73 per cent in 2020 to 72 per cent in 2021, primarily due to a drop amongst those aged 55-64, from 76 per cent in 2020 to 65 per cent in 2021.

The report clarified that whilst the period from 2018 to 2020 had seen growing interest in support for these ideas, 2020 to 2021 had seen "no material difference", with one "very notable exception".

This was the fact that the proportion who feel personally responsible for making a difference has dropped back to 2018 levels, with 61 per cent supporting this idea compared to 66 per cent in 2020, driven by changes in attitudes amongst over-45s.

Further differences in age groups were also identified, as there was a "significant drop" in the number of members aged 45-54 who felt it was important to protect the vulnerable in society, falling from 86 per cent in 2020 to 79 per cent in 2021.

In contrast, the proportion of 22-34 year olds who believed that businesses had a wider social responsibility than simply making a profit was up from 82 per cent to 90 per cent over the past year.

However, these attitudes may not be translating into an awareness of responsible investment, as the survey found that less than one in five (19 per cent) savers were very aware of responsible investment once they had read Ignition House’s description of it.

Furthermore, just 17 per cent of DC pension holders said that they were "very interested" in responsible investment, whilst nearly a quarter (24 per cent) were not very interested and 9 per cent were not interested at all.

In addition to this, the proportion of savers who wanted the business in which their pension is invested to be chosen because they have wider social responsibilities than simply making a profit has fallen from 69 per cent in 2020 to 62 per cent in 2021.

The proportion of DC savers who would like their pension invested to do some good as well as provide financial return also fell from 80 per cent 2020 to 77 per cent 2021.

Commenting on the findings, Ignition House co-founder, Janette Weir, said: “It is interesting to observe that, over the course of the years we have been surveying people about their attitudes towards responsible investment, there is a core group of quiet sceptics – we estimate around 30 per cent - who wonder whether doing good will damage their pension scheme returns.

“The industry should focus on reaching these people and educating them about the fact that encapsulating ESG principles in default funds is part of good risk management and poses no threat to their investment returns.

“People have been through many hardships in the last year and a half. The good news is that instead of retreating into isolation, they are more concerned than ever about making the world a better place. This is hugely heartening and should be inspiring to those who are responsible for stewarding their all-important pension scheme savings.”

DCIF chair, Elaine Alston, added: “The pensions industry is very aware of ESG, and a great deal of change is taking place. Many pension companies are now starting to make net zero commitments.

“Investment managers are working hard to holding their investee companies to account in areas like climate change and social responsibility, as well as putting significant time and effort into ensuring we meet and exceed the expectations of our clients.

“Research like this demonstrates that all these efforts are not in vain; ESG clearly matters a great deal to DC savers. The missing piece of the puzzle is engagement.

"As people’s DC savings pots grow, they may well become more interested in where their money is invested. It is incumbent on all of us to make sure that, when questions are asked, we will have a powerful story to tell.”

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