Half of savers don’t know if their pension is ethical

by Jemma Jackson from interactive investor |

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As pensions minister Guy Opperman heralds sustainable investment options, our research suggests most investors are unaware of their pension carbon footprint.

Savers can support efforts towards a Net Zero carbon economy by choosing to invest their retirement savings in low-carbon businesses according to Guy Opperman, the Pensions Minister in an embargoed note to the press.
 
However, there is a long way to go. A sneak peek at the upcoming interactive investor Great British Retirement Survey 2020, which is soon to be published, suggests that more than half (53%) of respondents admitted that they did not know whether their pension was invested in a way aligned with their moral values. A further 28% claimed that it was aligned and 19% said it was not. With ethical considerations so low, the chances of most investors knowing their pension carbon footprint seems low.
 
This underlines a gap highlighted by the Make My Money Matter campaign, launched earlier this year by film director Richard Curtis, which aims to make it more transparent to individual savers how their pensions savings are invested.
 
Moira O’Neill, Head of Personal Finance, interactive investor, says: “The majority of us have no idea if our retirement nest egg is invested in a way that aligns with our moral values – let alone our pension carbon footprint. .
 
“We all have a carbon footprint, so it’s a big ask of any pension to be completely carbon neutral – but there are things that you can do to make your pension not just more ethical generally, but more environmentally friendly. Morningstar publishes a carbon score for funds, ranging from 1-100 and the lower the score, the better from a carbon neutral perspective – anything below 10 is considered low. For example, Fundsmith Sustainable Equity, which is on our ACE 30 rated ethical investment list, has a carbon score of just 2.77%.
 
“These scores are not easy to find, and we would like to support Morningstar by making these scores more accessible to more people. But it is not the only story. It’s really important to look at funds and investment trusts on a case by case basis. 
 
“We’ve worked hard to educate customers about ethical investing. In the absence of a clear directory of funds in the ethical investing space, we launched a long list of more than 140 socially responsible and environmental funds, investment trusts and ETFs available on the platform last year, broken down into three interactive investor ACE investment styles: Avoids, Considers and Embraces, to help investors understand the how the fund invests. We also launched our ethical ACE 30 rated list, the UK’s first, for those who value an expert opinion of what the best-in-class ethical funds are.”

Myron Jobson, Personal Finance campaigner, interactive investor adds:

“SIPPs don’t have to be complicated – they are a like a transparent glass bottle – it’s what you put into them, and there are lots of straightforward ethical options out there. There is no doubt that ‘going green’ is will continue to be a powerful investment theme as the climate emergency intensifies, alongside the Attenborough and The Greta Thunberg effect, continues to push the issue high up the political agenda.

“A good place to start when scouring the funds and investment trust world from a carbon footprint angle is geography. Canada, for example, has a high carbon footprint due to its high proportion of resource companies. And according to the World Economic Forum last year, while the US leads China under the CO₂ per capita (person) measurement, China is the world’s biggest polluter overall – no surprise, perhaps, given its rapid expansion. 
 
“South Korea is reliant on coal and has a higher energy intensive economy than most other G20 countries.

“But it’s not straightforward - despite having high total emissions, Brazil’s and India’s CO₂ emissions per person are comparatively low due to their large populations and relatively low GDP per capita. So how you measure carbon footprint is not straightforward. “If you want to have full control over how and where your pension is invested, arguably the best way is through a SIPP, which gives you greater control, choice and flexibility over your investments.”

These articles are provided for information purposes only.  Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties.  The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.

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