Investment consultants and pension advisers need to commit to “Paris-aligned” net-zero advice when recommending workplace pensions, products and services, according to Make My Money Matter CEO Tony Burdon.
Burdon was part of a panel discussion on reputation management and corporate alignment at Corporate Adviser’s virtual ESG forum.
The campaign group, is calling for all pension schemes to commit to a net zero target by 2050, with an interim target to halve emissions by 2030. But Burdon wants this to go further and include those involved in advice and consultancy.
Burdon says: “Investment consultants are in my view often part of the problem. Trustees rely on them for advice, but are these consultants committed to Paris-aligned advice? This should certainly be the default option.”
He says the MMMM will be calling on consultants to do more ahead of the the COP26, the UN Climate Change conference, being held in Glasgow in November this year.
The delegates on the panel agreed that employers were increasingly looking to align their workplace pension with corporate values, particularly in relation to ESG issues.
Travis Perkins head of pensions and financial wellbeing Paul Williams says: “For a company our size we take ESG very seriously. The business has made commitment to achieve net zero scope one and two emissions. It would be incongruous not to ensure all areas of this business align to this.”
Burdon adds: “The UK has a legal responsibility to achieve net zero emissions by 2050. Business and corporations are now looking at how they can do this. But they need to ensure staff pensions also align to these goals. Most are currently contributing to 3 or 4 degrees warming.”
He points out that the Cambridge Institute of Sustainable Research found only 5 per cent of business have reviewed at their workplace pensions in light of these net zero and ESG commitments.
Nick McMenemy, partner, Mercer says it was increasingly important that workplace pensions were aligned to coroporate values. He points out that organisation like Mercer help clients structure a range of benefits to ensure they reflect these values. “In many cases we are helping devise these corporate values.”
He points out though that there is often a disconnect between the pension industry and what members want. “In some cases members may be further down the line in terms of ESG thinking that some organisations. Companies are working hard to catch up with what members are thinking on many of these issues.” Consultants he says are helping with this process.
Williams says the COP26 has the potential to further drive demand for more sustainable workplace pension options. “We are not seeing a lot of noise from the membership at the moment, though individually many may be thinking about some of these issues. But it is inevitable there will be more demand.
“The pensions industry hasn’t always been good in translating what it is doing on ESG in a way that is understood by members. The question is how to make these changes meaningful and relevant for members and employers.”
McMenemy says that that companies were increasingly seeing the reputational risks from investing in a pension company that doesn’t consider such issues. “In the last 12 months we have had a lot more of these conversations with clients.”
Issue such as Black Lives Matter, the #MeToo movement, as well as issues to do fair tax policies and supply chains have highlighted how quickly social issues can become areas of concern among employees and employers. “This is going to be a hygiene factor,” he says, with employers are not going to want their pension to be invested in companies that may be contributing to rather than addressing these issues.
Burdon says this could help with engagement. “With DC there is a need for better engagement with employees. This is slowly starting to happen, and people are thinking about their money more. As well as recycling and finding greener energy supplies, people will increasingly consider their financial footprint.”
He says this offers real opportunity for the industry. “People could be proud of their pension. Pensions could offer values as well as value. This has the potential to really drive engagement and better understanding of pensions.”
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