Pension schemes driving global warming and nature loss don’t offer ‘Value for Money’ argues Huw Davies senior finance adviser of campaign group, Make My Money Matter.
‘Value’ is a subjective term which reflects the worth of something for someone. So it follows that in a climate and nature emergency – which the majority of the public is concerned about – more value should be placed on pension schemes taking strong climate action through their investment strategies, stewardship, policies, and vocal leadership.
Make My Money Matter welcomes the FCA’s efforts to widen Value for Money beyond costs and charges, to include investment performance and quality of service. After all, who wouldn’t want healthy returns on their savings at a fair cost, and with good service? That’s a given, and schemes that don’t perform should be held to account – after all, they are looking after our financial future.
But the proposals don’t include metrics to enable the disclosure and comparison of sustainability performance by schemes – this is a major omission which ignores something which matters for people, and is therefore of value.
The UN’s Peoples’ Climate Vote is the world’s largest standalone public opinion survey on climate change. The 2024 results are stark. For the UK, they show that 50 per cent of the public is either ‘extremely’ or ‘very’ worried about the effects of climate change on the next generation; that over half are more worried about climate change this year than they were last year, and 84 per cent think the UK should strengthen its commitments to address climate change.
These trends are likely to grow as we all see the very real impacts of heating and nature loss – here and around the world – especially amongst the younger generation of pension savers who will be retiring at the back end of this century.
For a young person auto-enrolled into a pension today – would it represent ‘value for money’ if their scheme performed well on financial and service metrics but was helping to drive a world unfit to live in? I suggest not at all. In fact, this would seem to represent extremely poor value for money.
Put simply, a scheme which performs strongly on the metrics proposed by the FCA but which supports companies and activity which are driving the climate and nature emergency – creating a world not fit to live in – cannot be said to represent holistic value for money.
We’d like to see an additional lens added. This should consider scheme performance on climate and nature, and so allow employers and the public to bring these factors into their value judgement and comparison of schemes, alongside more conventional value metrics.
Climate action varies markedly within the pension industry, and the public rightly expects that those looking after its money are not helping to wreck the world they will retire into. We made a start on this with our Climate Action Report, but let’s not ignore a systemically important area for all of us – especially not when determining what represents ‘value’ to pension scheme members.