Workers are actively concerned that their pension savings should be invested in a way that respects environmental, social and governance (ESG) issues, but not at any cost, according to a study from leading life and pensions group Aviva.
Two-thirds of consumers surveyed by Aviva stated that they believed it was important to consider ESG factors before investing. When limited to those who are actually saving into a pension fund at the moment, the figure was even higher, at 72 per cent.
Women are more likely to consider ESG investing at 70.4 per cent among all respondents, with males at 63.9 per cent. Perhaps counter-intuitively, its importance is broadly similar across all age cohorts.
Just under half of the 1,200 people surveyed are actively saving into a pension fund.
But only one in five people said that investing sustainably was more important to them than investment returns.
The issue is becoming more relevant for investors and their advisers with the coming into effect earlier this year of the EU's Sustainable Finance Disclosure Regulation. It imposes obligations on fund managers to disclose how sustainable their funds are.
Aviva said the introduction of the new disclosure regime spurred it to see how important ESG considerations were to consumers.
Two-thirds said they would only invest their pension sustainably if the returns were the same or better than they would otherwise be, with the figure higher for those actively saving for retirement at 71 per cent.
And while just over a half of pension savers said they would like to increase their pension savings into companies helping to combat climate change, roughly two-thirds said they would only consider doing so if they are not paying higher fees and charges.
Negative for investors
The survey also showed that large numbers of consumers still feel they don’t fully understand the factors at play in ESG investing.
Respondents reacted more adversely to the idea of staying fully invested in companies that attract criticism over treating their employees poorly, governance and executive pay issues than to investing in businesses with a negative environmental impact.
But the biggest proportion of respondents in each case said they would need to take advice before deciding what to do.
Richard Jones, head of product, propositions and marketing at Aviva, said its investor's multi-asset funds now have a binding commitment to incorporate ESG considerations into the investment decision process.
He noted that data from fund rating agency Morningstar shows that assets in sustainable funds in Europe have surged by 52 per cent and hit €1.1 trillion at the end of last year.
Morningstar said 52 of the 69 ESG-screened indices outperformed their broad market equivalents last year, while 88 per cent outperformed for the five years to the end of 2020.