Co-founded by Richard Curtis, director of Love Actually and one of the brains behind Comic Relief, Make My Money Matter is a campaign for responsible investment for UK pension funds. Is ethical retirement saving one of the most effective actions you can take? Article by Nick Green.
Are you trying to reduce your water and energy usage? Drive less and use public transport more (lockdown notwithstanding)? Are you eating less meat? Limiting air travel? There is one more thing that you could be doing, which is apparently up to 27 times as effective as all these measures combined. It’s ensuring that the money you pay into your pension is invested in sustainable funds.
This is the bold claim put out by Make My Money Matter, a new people-driven campaign launched this summer. One of its co-founders is Richard Curtis, the writer and director responsible for some of Britain’s best-loved TV and film comedies, and also one of the creators of Comic Relief. Launching the campaign, he said, ‘People are in the mood to change their behaviour and change the world… People are really asking what they can do in their own lives.’
The majority of the UK’s investors may not realise that they are investors at all. But everyone who saves into a pension is an investor, and since auto-enrolment was phased in from 2012, that now includes most people in employment, as well as many self-employed, amounting to around 18 million savers. In total, Brits now have a staggering £3 trillion invested in pension funds – but few have any idea about where or how this money is being used. Research shows that 70% of pension savers are concerned about the ethics of their investments, but that only 20% of investments are confirmed to be ‘responsible and impactful’.
According to Make My Money Matter, pension funds have been invested in ‘some of the most unsustainable and exploitative industries on the planet, from tobacco to fossil fuels, arms manufacturing [and] gambling.’ However, the campaign stresses that isn’t urging savers to switch their funds immediately, but rather it aims to ‘start a conversation’ about how the UK invests its retirement savings. The aim is to raise these issues in the public consciousness, to provide more transparency about how pension funds are managed, and create a greater demand for sustainable investments that can then be delivered.
Some pension funds are already ahead of the curve, including the UK’s largest private scheme, the Universities Superannuation Scheme. Shortly before Curtis’s campaign launched, the fund announced that it would no longer invest in any company connected with tobacco, thermal coal or arms.
The Make My Money Matter campaign cites some bold ambitions. Its message is that committing to ethical investments should not mean having to compromise on returns, and that sustainable businesses have the potential to be as profitable – if not more so, in the long term – than more damaging ones. Furthermore, it believes that ethical pension funds are about more than just not doing damage, and that they have the potential to be a force for good. By putting these trillions of pounds into the projects that matter to people, they argue, the UK and the world can reap more than just a financial benefit.
The campaign’s partners include the WWF, the Green Finance Institute and Business in the Community, and another high-profile advocate is Mark Carney, former governor of the Bank of England and the UN special envoy for climate and finance. Carney said the campaign was ‘exactly the catalyst that the financial sector needs’ to move more decisively towards greener and more ethical pension investment, so that money can get to the places where it can do the most good.
How pension savers can take action now
Make My Money Matter aims to promote industry-wide change, but for pension savers who want to take prompter action, several options are already available. Many members of workplace pension schemes, especially those enrolled automatically, may remain unaware that they have a choice of funds available to them. Unless they express a preference otherwise, they will be enrolled in the scheme’s default fund, but most schemes have other options and these may include funds with largely or exclusively sustainable investments.
In fact, it’s worth checking anyway which fund you are in, as it may not be ideally suited to your current life stage or long-term goals. Default funds are designed to be ‘one size fits all’ so there is usually a better-fitting fund within easy reach, without the need to swap pension schemes.
If your workplace pension offers no specifically ethical funds, or if you are self-employed with a personal pension, then you could take charge of your own pension investment by using a SIPP. A SIPP (self-invested personal pension) is a type of pension where you choose all the investments and/or funds, so you have complete control over where your money goes. A SIPP can over lower overheads (since you do more of the managing yourself) and is popular option for people transferring or combining pensions from other schemes. If you’re in this position and want to take the opportunity to invest more ethically, a financial adviser can help you set up a SIPP that avoids certain industries or practices.
What does an ‘ethical investment’ actually mean?
If you are going to be choosing pension funds or SIPP investments based on their ethical credentials, it helps to have a good grasp of the different types and grades of ethical investment. Not surprisingly, this is rather a broad church. Some investments classed as ethical simply focus on ‘best in class’ companies, so might (for instance) still include industries such as fossil fuels, albeit those found to be less polluting. At the other end of the scale are those companies or funds that rigorously screen for activities that fail to meet their strict standards.
Ethical investments tend to be loosely grouped into three shades of green:
- Light green – Socially Responsible Investing (SRI), which focuses on the best-behaved companies rather than avoiding whole industries. Also passive funds which invest in all companies but then aim to influence company behaviours via shareholder voting rights.
- Medium green – Investing in companies with high Environmental, Social and Governance (ESG) standards, which measure their impact on the environment and society.
- Dark green – Hand-picking companies based primarily on their strong ESG criteria and excluding those that fail to meet their minimum standards.
Many financial advisers specialise in ethical investments, and most should be able to advise you on how to make your pension greener or more socially responsible.