Product providers need to address growing demand for more socially responsible investment (SRI) options within workplace pensions.
Corporate adviser Chase de Vere says there is demand from both employers and employees for more sustainable and ethical default options, but claims there is a “distinct lack” of support from product providers.
It points out that 10m employees are now saving into workplace pension, following the launch of auto-enrolment in 2012. Around 90 per cent of these savers are in default funds.
However Chase de Vere says that few of these default funds are specifically geared towards sustainable investment strategies, despite the fact that a recent survey — by Invesco — found seven out of 10 (72 per cent) scheme members through it would be a good idea if their scheme included socially responsible or ethical funds as part of this default.
Chase identifies Aviva as one product provider that is taking a more positive stance on this issue. Aviva has launched a default pension strategy based on its Stewardship fund range. This excludes companies that fail to meet certain ethical standards or that harm society or the environment.
The Aviva team also engages with companies to improve how they conduct their business. The Stewardship range were the first mainstream ethical funds, launched back in 1984.
Chase de Vere corporate consultant Rebecca Dorrian says: “We are finding that an increasing number of our corporate clients want ethical and socially responsible investments (SRI) to be easily accessible to their employees through their workplace pension scheme
“Many employees are also keen to invest responsibly and, while pension schemes typically have ethical options available, we know most employees simply stick with their default fund
“This is despite the fact that those investing ethically don’t necessarily have to sacrifice performance. Indeed, there is a strong argument that companies adopting a sustainable and responsible approach can out-perform over the longer term.”
She adds: “While some providers are including socially responsible factors in their investment process, too many are doing little more than paying it lip service
“This needs to change. As is often the case, the workplace is lagging behind the retail market.”