Interactive Investor

Pension savers want green funds made easy

22nd September 2020 12:11

Laura Miller from interactive investor

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More and more investors now realise that investing ethically does not mean sacrificing returns.

Sustainable investing is in demand among both male and female savers of all ages and income levels, but just one in 10 think it is easy to make their retirement pot go green.

Nearly two-thirds of those surveyed by insurer Scottish Widows wanted clear fund options which allow them to invest only in environmentally and socially responsible companies.

The findings echo data from fund house Morningstar, which showed asset management giant BlackRock saw a net inflow of £1.6 billion in August, one of the highest on record for the fund group, with approximately two thirds going into sustainable funds.

Having ways to invest specifically their pension only in sustainable companies mattered to a third of people in every age group, from 18 to 65-plus, in the Scottish Widows research.

But despite green investing’s popularity, savers still believe it is complex and there is a lack of guidance on how to invest ethically, with the survey finding most UK savers are missing out on one of the most effective ways to invest sustainably – through their pension.

More than two-thirds of savers reported not knowing how sustainable their pension is, and 65% said they do not choose where their pension is invested. Half didn’t know they could switch their pension investments into greener funds, and one in 10 were unaware they had any choice about their pension at all.

Dropping the investment sector jargon could be a big help. Funds investing in specific green initiatives that are clear about what they support are popular among investors.

Over half (56%) of those surveyed by Scottish Widows said a fund themed around clean energy and low-carbon transition would make them more interested in their pension, while 54% said the same of a zero-plastic themed fund.

For younger savers, easier responsible investing could have an even bigger impact. Two-thirds (67%) of 18-34-year-olds said they would invest their money in a fund focused on clean energy.

Maria Nazarova-Doyle, head of pension investments at Scottish Widows, said: “Environmental, social and governance factors – including a company’s exposure to climate change – can pose investment risks, and responsible investments can be better for customer returns as well as the planet.

“If sustainable funds can encourage more people to engage with their retirement saving, we need to find more simple and effective ways to bridge the knowledge gap to help people align their saving with their values.”

To make it easier to find suitable ethical investments, interactive investor publishes an ethical investing long list – the ii ACE 30 - that is broken down into three investment styles: Avoids, Considers and Embraces to help steer investors.

The ethical ACE 30 rated list, the UK’s first, was launched last year, and an interactive investor ethical growth portfolio followed in January 2020 for investors who want a ready-made, balanced, multi asset portfolio run within a socially responsible investing framework.

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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