Tune in, drop out disengagement: 5 ways to connect on ESG pensions
If members could watch their pension as a TV show, would they change the channel or have their nose to the screen?
Popcorn and fizzy drink in hand, remote perched precariously on the armrest, and you’re nestled comfortably on the sofa ready to make some investment decisions.
You listen patiently as the entrepreneurs explain their product or service alongside their brand story, the business’s revenue and profit to date, their valuation (goodness help them if they get this wrong) and ignore their nerves as they demonstrate their concept.
And although you may not have a neatly piled stack of cash sitting confidently on the coffee table, you certainly have a running checklist for whoever’s money is available. You will not let them part with it easily, you’ve been known to have words with the TV screen.
In this scenario, you’re an engaged spectator of investment opportunities. When it comes to engagement around ESG Pensions, the involvement from members and stakeholders may lie on a spectrum as well. Let’s identify the spectrum as,
- The disengaged audience – their attention may drift to the TV programme, but they’re fine listening with one ear. This may be a member who has a pension, but they don’t actively seek information or resources about it. Thoughts or guidance about their pension may flicker by, but they’re satisfied to let their pension work in the background.
- The engaged audience – their attention is fully on the programme, and they’re vocal advocates of the show. This may be a member who uses tools to track their pension, reads about how their pension works, and investigates options at different points in their pension journey.
- The active investors– they’re in the programme. This may be an employer or trustees who are responsible for finding appropriate pension schemes or businesses to invest in. They’re, with one hand taking notes and the other resting on the cash, scrutinising the investment opportunities for the best possible partnership
So, how can “The active investors” increase the “The Audience’s” engagement around ESG pensions?
First, it’s understanding the audience and their motivations – are people watching the programme and do they care about it?
Who cares, how much, and how do we know?
Aviva Master Trust Members care about ESG pensions, within limits, according to the Aviva Master Trust Survey results. While 62% of respondents believe ESG is important in relation to how their pension is invested, only 21% are ‘committed’. This means that while members are positive, reports the survey, they’re not convinced about the importance of ESG regarding their pension. And, demographically, the youngest and less affluent give it slightly more importance.
The top three ESG related priorities for members are:
- Improving governance (the way companies are managed)
- Addressing climate change and global warming
- Promoting waste reduction and recycling
This suggests that, although they’re tuning in to the programme and can reflect on their views, they haven’t entirely bought into the show. The survey also suggests that members are unwilling to prioritise ESG over potential returns on their pension. When asked,
71% of members responded “No, only if my pension is expected to be the same or higher” while 29% would accept a lower expected pension in favour of ESG prioritisation. The report concludes that while most members agree with the underlying aim of ESG pensions, few are willing to sacrifice pension performance and, ultimately, ESG isn’t top of their minds.
Would you wish your pension savings to concentrate on Environmental, Social and Governance factors if it was expected to lead to lower future investment returns (and therefore a lower pension)?
The point isn’t that members don’t care about ESG matters or their pensions.
The point is that some are not willing to sacrifice one for the other. And recognising this is fundamental to their engagement.
Five ways to connect over ESG pensions
As the Aviva Master Trust Member survey suggests, emotions and knowledge around ESG focused pension schemes vary. This grey area creates an opportunity to build connections and trust. Here are five strategies to engage members on ESG pensions:
1. Be discerning – in your communications, one size doesn’t fit all
A member’s work journey, pension journey, and even work personality may be contributing factors to their relationship with their pension. An unmarried twenty-three-year-old legal executive may have a vastly different relationship to their pension than a forty-six-year-old, single mother of two who’s a senior software engineer. Similarly, an ‘Architect’ on the Myers-Briggs personality type may approach their pension differently to an ‘Artist’.
Recognising that members’ ethical values and awareness are developed by complex socioeconomic factors and life circumstances may also help foster inclusivity and trust around their engagement on ESG pension strategies.
2. Be authentic – in your communications, honesty matters
If your pension scheme could do more to show responsible investing, then be honest. Understanding your scheme’s current limitations or space for improvement is a positive. This may be an opportunity to collect members’ views around ESG pension investments and how best you can meet their needs.
And although some schemes offer an ESG fund as part of a self-select fund range, that isn’t the same show of commitment as incorporating responsible investment within the default fund. It’s also important to explain why the scheme views issues like climate change as important and how ESG values can underscore long-term investment returns.
3. Be creative – in your communications, stories connect
Numbers and statistics may speak to the mind, and there’s a place for this, but it’s stories that remain in people’s hearts. ESG issues can be emotive and the views entirely subjective. So, providing members with real stories about how their ESG pension is making a difference can be a powerful way to capture and retain their attention.
When someone adopts a penguin or panda from across the world, they don’t open a brochure to find graphs and statistics tumbling off the page (although, presumably, this could be provided). Rather, they find a story about Penny the Panda’s activities and how the funding is helping her thrive – how the money is changing her life.
Same with ESG pension schemes, except they may not be as adorable. Nevertheless, providing members with stories about how the fund is impacting or changing the world around them leaves a lasting impression.
4. Be transparent – in your communications, clarity builds trust
Since 2019, trustees are required by law to be more transparent about how they are addressing ESG matters, like corporate governance and climate change, in their investments. This is a great opportunity to share information with members throughout the year and could take different forms. Bring transparency and creativity together, for example, by:
- sending regular emails that highlight relevant impact stories
- dedicating a podcast episode to an interview with a trustee or investment manager
- developing a dedicated ‘news and updates’ section in the scheme’s app or website
5. Be curious – in your communications, reach out
“An ESG pension means different things to different people,” explains Dale Critchley, Aviva Policy Manager, Workplace Benefits. It can be challenging to build a cohesive investment strategy around individuals’ personal values and beliefs.
For trustees who are building a responsible investment portfolio, however, this can be an opportunity to learn about members’ views and increase engagement. Through surveys and focus groups, the trustees can gauge the members’ temperature on certain issues. In so doing, members may feel as though they have a voice with opinions worth sharing and being part of the ESG Pension conversation.
Members are watching the show – it’s just a matter of making it relevant to them.