Stephen Rice, Pensions and Investment Lead at Aviva Life & Pensions Ireland looks at how investing sustainably through your pension can be a good move.
Barely a week goes by without social and environmental issues appearing in the news. From climate change to plastic in the oceans, from gender equality to animals in danger of extinction, many people are taking a stand on social and environmental issues.
And concern for how we treat the world and its inhabitants – be they human or animal – is not confined to those who are willing to take up placards for their beliefs. Research from Aviva undertaken in May 2021 shows that 8 in 10 of pension holders are concerned about the impact of climate change1. Covid 19 seems to have reinforced the collective desire for social and environmental sustainability with almost half of us saying we feel more responsible to help with environmental issues since the onset of the pandemic1.
Because of this, many of us are taking visible action to live in line with our personal beliefs, values and concerns1. For example, recent Aviva research indicates that 8 in 10 of us are recycling and 7 in 10 of us are saving energy at home and 3 in 10 of us are focusing on eco-friendly fashion, eco-friendly eating, and eco-friendly travel.
Your pension as a powerful tool for change
For many of us, the money going into our pension represents the largest pot of money we will ever have. That money does not simply sit there waiting for you to retire – it is invested. And choosing where to invest it can make a significant difference, not just to you but to the planet and society as a whole. That is where ESG investing comes in.
At its heart ESG investing is choosing to use your pension to support investments who are well positioned to thrive in the future. Broadly speaking this means investing in funds that seek out companies who look after their workers, their communities, and the environment.
ESG investing takes off and pays off
The heightened concern over climate change and the increased appetite to invest in line with one's values (like gender equality), mean ESG investing has gone mainstream. Data from fund rating agency Morningstar shows that the assets in sustainable funds in Europe surged by 52% to hit €1.1 trillion in December 20202. Many of Irish investors realise the incredible power their pension has to do good. In fact, our research shows that 7 in 10 Irish pension holders want to consider environmental, social and governance factors when they invest their pension1.
However, two thirds of Irish pension investors say they do not want to give up any return or pay higher fees to invest responsibly1. We don't believe customers should have to do either. Research from Morningstar has shown that incorporating an ESG approach into investment methodology has the potential to improve returns. In 2020, 52 of the 69 ESG screened indexes from Morningstar outperformed their broad market equivalents, while 88% outperformed for the five years to the end of 20203. Of course, as with any investment, the value of ESG funds could always go down as well as up and you could get back less than you put in.
Putting your pension where your values lie
If you have an Aviva Pension, or are looking to open one – good news, there is a range of ESG and ethical funds available across them all.
Interested in aligning your investments with your conscience? Find out more about Aviva’s investment options.
Watch our short video to learn more about ESG investing.
As with all investments, it is worth speaking to a Financial Broker first to make sure it is the right choice for you.Find a local financial broker.