Climate change

Responsible investment is critical

In 2020, responsible investment (RI), especially climate-related, has become a vital topic for pension schemes and providers.

Individuals really care about it too.  We know this from new research from Nest Insight, reports from the DC Investment Forum in 2018 and 2020, and videos from ShareAction.

And Richard Curtis’s Make My Money Matter campaign is gaining ground fast.

 

Pensions dashboards are coming too

Meanwhile, pensions dashboards are coming to the UK, covering all schemes and providers.

An individual logging in to a dashboard will be able to see, for the first time, summary information about all of their pensions, together in one place.

That’s easy to say, but a huge task to deliver.  Government, regulators and the pensions  industry are all working hard to make dashboards a reality from 2023 onwards.

 

Bringing the themes together

Given its critical importance, might it be possible to bring the topic of RI together with the dashboards initiative, by the time pensions dashboards are launched in the mid-2020s?

 

Could dashboards show you how green each of your pensions is?

Imagine a simple list of your pensions on a pensions dashboard.  Then, alongside each one, imagine a simple logo (or label) indicating how good for the planet each pension is.

Think of it as food labelling for pensions.   Or like the energy efficiency labelling of domestic appliances.   Or an Energy Performance Certificate (EPC) when you sell a house.

Composite labels

So we already label: houses, fridges in houses, and food in fridges.  Now we need to label the pensions with which we’ll buy that food when we’re older.

This could be incredibly powerful, dramatically increasing people’s engagement with their pensions and their trust in their pension providers.  Evidence suggests it might even lead people to increase their pension contributions.

 

A step too far?

But if getting dashboards up and running is akin to the first labour of Hercules, then agreeing a simple, consistent label (or set of labels), to easily show individuals how “good” their pensions are, is akin to the second.

Shouldn’t we aspire to rise to this challenge, though?  In 2021, the year the UK hosts COP26.

The April 2018 DCIF report Navigating ESG: A Practical Guide suggested that:

“the pensions industry would do well to learn from the success of Fairtrade and develop an instantly recognisable name and logo to help members easily identify whether their pension money is being used for ESG investing.”

The ambition is there.  If you’d like to discuss how we, as a pensions industry, might bring this about, please get in touch.

 

Many thanks, Richard
20 November 2020