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We take a closer look at how offering access to ESG investment options can benefit not only employees but employers too.
This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in. These articles are intended for employers and HR professionals, not for individual investors.
4 October 2023
Over the last few decades, terms like net zero, carbon footprint and greenhouse gases have entered common vocabulary.
The exact definitions can be complex to define, but the frequency of use of these terms indicates an increased awareness of climate and environmental issues.
This has led to individuals and organisations recognising the significance of aligning financial goals with ethical values. And their attention is turning to pension investments.
Pension funds which integrate Environmental, Social and Governance (ESG) into their investment design are becoming more prevalent.
The collective power of pension investments isn’t a new concept. Pension funds, by their nature, pool together the financial resources of many individuals and create a greater investment potential.
The combined value held in defined contribution (DC) pensions in the UK is projected to grow from £500bn to £1trn by 2030.
A greater interest in ESG inevitably leads a greater number of investment solutions. There are more ways than ever for individuals to choose investments in their pension that align with their values.
It’s all about making informed decisions that go beyond financial returns. And money saved in DC pensions has the potential to drive meaningful change.
Communicating ESG investment options to employees isn’t easy. The first and most obvious hurdle to overcome is this dreaded three-letter initialism.
Like all good three-letter initialisms, an explanation is usually needed to understand the wider picture.
ESG refers to a set of criteria which investors or fund managers consider when assessing the sustainability and ethical impact of a company or investment.
The term ESG stands for Environmental, Social and Governance.
Each component of ESG represents a different aspect:
It's always worth starting by clearly outlining the concept of ESG and its significance for sustainable and responsible investing practices.
Utilise straightforward language and relatable examples to break down any complexities associated with ESG criteria.
Present investment options within the ESG framework, detailing the companies, industries or projects that align with environmental and social values.
Incorporate visuals, such as infographics and charts, to make the information more accessible and engaging.
Provide resources like webinars, guides and FAQs to empower employees to make informed decisions that align with their personal values and long-term financial goals.
By prioritising clear, educational and engaging communication, employers can inspire employees to actively participate in ESG investment options and contribute to a more sustainable future. Remember though that all investments fall as well as rise in value, so investors could get back less than they invest.
Offering employees access to ESG investment options and communicating those options clearly can benefit employers too.
Here are four reasons why you might consider providing a wider investment choice for your pension offering. This is not personal advice. If unsure, please ask about advice:
Find out how we integrate ESG into our default pension investment - https://hl.foleon.com/hl-growth-fund/esg-guide/
This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in. These articles are intended for employers and HR professionals, not for individual investors.