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A good time to use responsible investing to engage members

Gareth Trainor | September 30, 2021

Time to read: 5 minutes

Gareth Trainor,

Good Money Week in October, COP26 in November – opportunities to explain the potential power of pension investments to your members? With sustainability issues hitting the headlines, it’s a good time to help bring responsible investing to life and use it as a way to improve engagement.

We asked Gareth Trainor, Head of Investment Solutions at Standard Life, to answer – in simple terms – some questions members may have. Read on for member-friendly explanations of why investing responsibly makes sense for people, the planet and pensions.

How can you save for your future and make a difference to the future of the planet?

Think of the vast amount of money invested in pensions across the world. What if this money could avoid the bad and improve the good? In other words, direct it away from companies causing harm to people and the planet, and into companies that are helping to tackle the huge sustainability issues, like climate change and human rights, we all face?

What if investment managers could help drive change for the better by encouraging the companies they invest in to improve their sustainability?

And what if such a transition could truly make sense for the planet – and still benefit you?  Well it does, and it can. It’s a change, I’m glad to say, that’s happening with increasing pace.

If we’re to meet the needs of the global population without compromising the ability of future generations to meet theirs, we’ll all have a part to play. It comes down to the choices we make. And collectively, through our choice of pension investments, we can help to make a difference.

How do pension providers help make that happen?

As a pension provider, we need to help drive a broad improvement in sustainability while also aiming to deliver positive returns for our customers.

It means thoroughly considering the financial risks and opportunities that come with sustainability issues – what investment managers call environmental, social and governance factors (ESG) – in all our investments.  And it means offering customers additional ways to invest according to their values, and to support specific sustainability issues.

This all comes under what we, at Standard Life, call responsible investment – the ways we can help aim to protect our customers’ financial futures while protecting the future of others.

It’s possible to achieve our retirement and savings goals in a responsible way and doing so can make sense not just morally, but financially too. It can help drive change for the better while also aiming to make investments more resilient and maintaining or even improving returns.

So you’re saying we can all invest to do good while at the same time potentially growing our own money?

Yes. Aiming to make money doesn’t have to come at the expense of sustainability. In fact, it’s just the opposite – considering the risks and opportunities that sustainability issues pose is an important part of successful investing.

How a company in any industry, in any country, manages its ESG behaviours can affect how it performs. So for instance, how it manages waste disposal and energy use, supply chains, or how it treats its employees and local communities can support or destroy its reputation and share price.

Companies coming up with solutions to sustainable issues may offer growth opportunities in new markets. Technologies to capture and store carbon; water efficiency for homes, businesses and agriculture; cooling equipment for homes and offices; energy-efficient technologies and products; infrastructure improvements to help protect against rising sea levels – this is a small list of opportunities  companies are seizing to help tackle the implications of climate change.

Are more responsible companies more resilient?

There’s increasing evidence and acknowledgement that how a company manages ESG factors can have a significant impact – both positive and negative – on how well it operates.

In some cases companies that are taking these factors into account have been more resilient to market shocks and downturns, and may outperform over the longer term. Though please remember that past performance isn’t a guide to future performance.

On the flipside, if we think about companies that can do harm, they also carry the potential for considerable financial risk. For example weapons manufacturers, thermal coal and unconventional oil and gas can pose serious financial, regulatory and reputational risk to the companies involved. The most carbon-intensive fossil fuels are at risk of being made obsolete due to climate-change action, as well as the rapidly falling costs of renewable energy technologies, such as solar and wind power.

And a company in any industry that breaches rules around human rights, labour, environment and anti-corruption, could suffer financial consequences. This could happen through fines or major reputational damage hitting sales of products and services.

What would you say to a member approaching responsible investment for the first time?

As with all investments, what you choose to do really comes down to your own preferences, levels of interest and knowledge, and attitude to risk. So it’s worth spending some time considering these factors. You might find our investment guides and attitude to investment risk questionnaire helpful.

But the really exciting part of all this is that you can aim to grow your money over the long term while also driving change for the better.

So whether you’re an ‘all about the money’ return-seeker, are a considerate investor keen to do less harm and more good, or are keen to invest for specific impact, there’s lots of choice. The important thing is to look at the detail of what you’re investing in and to get advice if you need it. There’s likely to be a cost for this.

What does it all mean for members with Standard Life pension investments?

It means they’re investing their money with a company that takes sustainability seriously. Fostering responsible investment is one of our six sustainability commitments, which apply across the Phoenix Group.

At Standard Life we’re actively committed to investing responsibly for all our customers. Our default investment option for new customers primarily aims to improve pension pot returns over the long term, but it also has a clear strategy to invest responsibly.

That means it ‘avoids the bad’ by not investing in the companies doing the most harm to people or the planet. It ‘improves the good’ by investing even more in companies that are proactively trying to help fix the sustainability issues we face. Meanwhile we ‘drive change for the better’ by ensuring the companies we invest in are encouraged to improve how they operate and the impact they have.

If you’re an existing customer, our investment managers already consider environmental, social and governance (ESG) factors in all our range of off-the-shelf and self-select investment solutions. You can find out more here.

But we’re doing even more. And over the course of the next few months we’ll be writing to over a million customers in some of these options explaining the extra steps we’re taking.

Alongside this, we also offer a choice of self-select options for customers who want to tap into specific ethical, environmental or social goals.

Our commitment to invest responsibly means you have choice – whether you want a broad solution that takes sustainability risks and opportunities into account, or to select according to a specific ethical requirement or sustainable goal.

Did you miss ‘ESG and your default – financials vs ethics’?

Can a default pension solution deliver good member outcomes while addressing sustainability risks and opportunities? Find out more as Gareth Trainor, Head of Investment Solutions, explores the moral vs financial debate of incorporating ESG.

 

The information here is based on our understanding in October 2021 and shouldn’t be regarded as financial advice.

The value of investments can go down as well as up and may be worth less than what was paid in.

Standard Life accepts no responsibility for information contained on external websites. This is for general information only.

Gareth Trainor

Head of Investment Solutions

Gareth has overall responsibility for Standard Life’s investment solutions covering a wide range of activities including solution design and development, data and reporting, fund and pricing controls and governance.

He is also Chair […]

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Gareth Trainor

Head of Investment Solutions

Gareth has overall responsibility for Standard Life’s investment solutions covering a wide range of activities including solution design and development, data and reporting, fund and pricing controls and governance.

He is also Chair […]

Read Gareth's blogs
Gareth Trainor,

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