Employers place a greater importance on adopting responsible pension investment strategies than their employees, according to new research from Aviva.
Its research found that eight out of 10 employers think it is important that their workplace pension is invested responsibly, to take account of environmental and social impact.
However, just 65 per cent of employees thought this was important. These findings, in Aviva’s Working Lives Report 2022, also showed that a further 19 per cent of employees said responsible investment is important but only as long as it does not impact the performance of their funds.
Just over a third (34 per cent) of employers think it is essential for the default pension fund to be invested responsibly. However, there are more – just under half (46 per cent) – that think it is important, but not essential.
The research found that while the majority of employers and employees supported responsible investment strategies, over half (55%) of employees do not currently know how their workplace pension fund is invested, and whether it takes these factors into account.
Aviva head of investment strategy and propositions Maiyuresh Rajah says: “It could be that employees and employers either consider return on investment more important than having funds invested responsibly, or that they see them as mutually exclusive in that ‘you cannot have both’.
“ESG factors are material sources of both managing investment risk and out-performance opportunities for customers. We believe integration and alignment of ESG throughout investment solutions is essential and, over the long-term, will lead to superior investment returns.
“Investment strategies that manage their social and environmental impacts and provide solutions to support the transition to a sustainable future for people and the planet should provide positive investment and sustainability outcomes. The landscape in which companies operate is changing and those that align to the transition and manage the associated risks – be that policy, regulation or reputational – will outperform.”
Climate change was amongst the top three most important things that pension providers should take into consideration when deciding where to invest contributions, according to both employers and employees.
Rajah adds: “Employers and employees say that climate change is an important consideration when investing into a pension, but capital needs to be redirected to make an impact. The first step is education.
“Employers, with the help of pension providers and advisers, have a crucial role to play in helping their people understand the impact they can have on climate-change and society through their workplace pension. Pension providers can help employers make available innovative and engaging tools that can help people understand why responsible investing is important and how their investment funds fare from an ESG
perspective.”