Strength in numbers: How to keep scheme members engaged with ESG

The Covid-19 crisis will not be a reason for investors to pull back from this area, quite the reverse, and we believe that pension scheme members are crucial here.

A recent survey by the Defined Contribution Investment Forum supports the point that more people are asking questions about the world they live in and want to help bring about change. It found that 66 per cent of respondents were more worried about the state of the world and felt personally responsible for making a difference, compared with 59 per cent only two years ago.

A real challenge is for workplace pension scheme providers to reach out to members and turn complicated investment speak into clear and engaging communications about what investing responsibly means

While this is encouraging news, a real challenge is for workplace pension scheme providers to reach out to members and turn complicated investment speak into clear and engaging communications about what investing responsibly means, and why as a company they are passionate about reducing the risks posed to the environment or to society.

Specific engagement examples could be included to illustrate this, such as how discussions with a company’s management team have led to a business ending its financing of coal-fired plants, how increased investment is making a difference to a company’s ability to make vaccines and treatments more accessible to people around the world, or how engagement has resulted in increased female representation on a company’s board and how this will benefit the business.

If such communications are done in a lively and informative way, in which members feel engaged, investing responsibly could ultimately trigger greater interest from scheme members in their pensions.

The adage ‘strength in numbers’ applies here; ultimately, insightful communications could result in greater numbers of people taking an active interest in what is happening in the world around them, and demanding change themselves as a result. Pension providers, asset managers and the corporate sector in general stand to benefit from the powerful domino effect that this could create.

Schemes and providers could also use this as an opportunity to engage in a more relatable way about pensions and investing in general, something which the industry has struggled with. This, is in turn, could lead to increased contribution rates from members wanting to use their savings to help create the type of world they want to retire into.

Helping each other overcome Covid-19 challenges 

Members at the start of their retirement journey might be wondering why they should have a pension at all, following the volatility in financial markets at the height of the Covid-19 outbreak in March.

We cannot rule out further swings in asset prices over the next few years as economies go through a period of recovery.

Providing members with a pension through which they can benefit not only from long-term capital growth, but also from having regular updates on how their savings are being used to help bring about much-needed change, such as the move to renewable energy, could even be a major step in helping members to understand the importance of investing.

The challenges we have all faced so far in 2020 — from businesses, pension providers and pension scheme members to asset managers — are quite exceptional.

But in the same way that businesses, industries, economies and policymakers can use the crisis to improve their approach to addressing environmental, social and governance issues, as they try to get through this unprecedented period and look to the future, it can also be used by the pensions industry to show pension scheme members that their contributions are being used as a force for good.

Laura Stewart-Smith is workplace savings manager at Aviva