Vivek Roy: How can employers incorporate ESG into their pension investment portfolio?

Vivek Roy

When employers are busy with the day job it can be hard enough to keep on top of their workplace pension scheme, without worrying about the way members’ money is invested. However, organisations could be missing an opportunity to put the money to better use and engage staff in the process.

The Navigating ESG: a practical guide report, published in April 2018 by Ignition House and the Defined Contribution Investment Forum (DCIF), shows that pension savers have an intuitive grasp of what responsible investment means, but do not realise that it applies to them. Once members understand that their pension savings are invested, they are shocked that their money might be invested in tobacco or arms organisations.

The youngest age groups are the most likely to feel personally responsible for the state of the world, according to the aforementioned research.

So, how can employers become more responsible investors? First, they need to give themselves permission to take gradual steps. Nobody gets this right overnight.

Employers can start by thinking about what would be on their and their employees’ lists of investment no-nos, based on what they already know, or think they know, to be true. Is it worth revisiting this list?

Consider asking savers what they would and would not like to have their money invested in. It might not be possible to cater for every single saver, but employers might find that there are some strongly held views among the workforce that are easy to act upon.

Next, ask an organisation’s investment managers where members’ money is invested right now. What do employers already know and what would they like to find out? Are there any findings from member surveys that they could pass on?

Employers may feel like their actions will be a drop in the ocean. However, a lot of investment managers care about these issues too, and might already be doing great work in this area. Plus, if enough people start asking questions, it makes change more likely.

Vivek Roy is vice chair at the Defined Contribution Investment Forum (DCIF) and adviser, institutional business development, at Axa Investment Managers