Article by Tony Clark, Senior Propositions Manager, Pensions at St. James’s Place Wealth Management
You may already be doing things to make a difference, such as eating less meat, not wasting electricity or using a bag for life. You may even be adding your signature to causes or writing to your MP.
But many people don’t know that their pension is a powerful vote that gives them real influence. If you have a pension, you have a power that could have a bigger impact on our environment than all of those things put together.
Research shows investing your pension responsibly can have 27 times more impact on your personal carbon footprint than flying less, taking shorter showers, eating less red meat and taking the train instead of the car combined.
Writing a simple email to your pension provider could be one of the most effective actions you can take in the fight against climate change.
I want to invest my pension responsibly to ensure that when I retire, it is in a world worth living in. I want to understand how you engage with the businesses you support on environmental issues to ensure a sustainable future. Is my money invested in businesses that are on the right side of climate change?
But it’s not just environmental issues you can write about. How about using the email to address other issues you care about, such as social inequality, human rights or slave labour?
It’s important to remember that the money in your pension is being used on your behalf right now. Other people are deciding how to use it and which companies to invest it in to help it grow. Your pension pot increases only when the company that it’s invested in grows.
In September 2021, The Office for National Statistics reported that the money in UK pensions was £6.1 trillion between 2016 and 2018 – a huge amount, which is mostly used to help companies continue expanding and profiting. The companies that your pension is funding could be a household name or one you’ve never heard of.
Many of these companies are larger and more influential than some small countries and responsible for hundreds of thousands of employees and billions of pounds worth of resources. The actions of these companies will have a huge impact on the environment. But they all need our pension money to keep running and to grow.
The influence we as individuals have can be huge. Think about it this way; getting one person to boycott plastic is good, but getting one global company to stop selling it completely is much better.
Responsible investing has become a bigger priority as the world wakes up to the severity of the global environmental crisis. It’s no longer solely about financial returns.
Sometimes known as environmental, social and governance (ESG) investing – responsible investing directs money into high-performing companies that operate sustainably. This means that you could still earn your returns while taking better care of the planet and its people – win win!
Some of these businesses may be in sectors where change will have the largest impact, such as oil and gas. By influencing where your money is invested, you could encourage them to transition to clean energy – this could make a powerful difference.
Essentially, if we do nothing and businesses continue doing business the old way, we damage the planet. This won’t leave us with a world we want to live in 50 years from now. The money that we hold in pensions amounts to trillions of collective pounds – by directing this away from companies with poor records towards those that are improving their environmental impact, three extraordinary things occur:
The good news is that the prospect of returns made from companies with strong ESG principles are exciting. They are cutting-edge businesses such as Microsoft, Nike and Volkswagen and in actual fact, can offer better long-term growth prospects and could be worth far more in future because they are, by nature, more sustainable.
If everyone with a pension sent an email like the one above the shift could be seismic. Essentially, the more people who do this, the bigger the impact will be.
By asserting your influence over what other people do with your money, by the time you come to spend it, the planet could be in better shape.
Our world is changing faster than anyone predicted. Responsible investing has a huge role to play in shaping a better world and building a sustainable future.
**The value of an investment with St. James’s Place will be directly linked to the performance of the funds you select and the value can therefore go down as well as up. You may get back less than you invested.