When you pay into your pension, how much do you really know about what happens next?
Let’s pretend for a moment you could follow your money on its journey and see what happens…
It may seem complicated, but essentially Fund Managers choose how to invest your money. In order to make it grow, they often buy shares of large companies traded on stock exchanges around the world and these companies play a major role in shaping the world we live in.
Globally, hundreds of trillions of pounds are traded and monitored every minute of every day. And the performance of funds is available for everyone to see at any time.
This sounds like a good thing, but it can actually lead to short-term decision-making. Let’s look at why…
Imagine the pressure you would face from being constantly monitored. Fund Managers need to show the investments they make are growing in the short term. Also stock exchanges and investment banks make more money the more shares are bought and sold.
As a result, companies are also pressured to act in the short term to show immediate returns.
To make things worse, if CEOs report their company’s performance too frequently, the bigger picture gets ignored. Long-term benefits such as investing in innovation, workforce skills, or the efficient use of natural resources slide down the priority list – as do the societal and environmental impacts of things like carbon emissions and air pollution.
In the long-term this can actually lead to weaker companies and lower profits…
Because in reality it’s good companies that treat their customers, employees, the local community and the environment well that will make sustainable investments…
Think back to the beginning. You invested in a pension product for your future, but it’s actually likely to be invested over shorter and shorter timescales.
Your goal was to create a better future for yourself, and your family, but the result could well be a future you’d never have chosen.
No-one designed this system. It’s evolved over time and under the assumption we have unlimited natural resources. But we don’t.
There’s no one quick fix, but there are steps we can take.
As pension funds invest the savings of millions of people, together, you have huge power.
If you insisted that your money was invested responsibly, it could have a transformative effect, unleashing trillions of pounds in sustainable investments. But people rarely ask.
That’s where you can make a difference…
As a pension saver, you have the power to influence where your funds get invested. Simply ask your pension provider how your money is invested and they should tell you. They should also suggest more sustainable options to choose from, and be open with you about how they’ve voted at companies’ annual meetings on the issues you care about.
This isn’t a challenge for tomorrow, it's a challenge for today, and everyone can be part of the solution.
Money talks – what’s yours saying?
If, like many of us, you’re concerned about protecting the local environment for your children and grandchildren to enjoy, you probably do what you can to help in everyday life. Recycling plastic containers, cutting energy use in your home, taking the bus not the car – and so on.
But did you know that you can also do your bit by looking at where your pension is invested – and by supporting what’s known as ‘responsible investment’?
What exactly is responsible investment?
Responsible investment is all about using investment to encourage companies to take a longer term view when they’re making business decisions – and to think about the impact those decisions might have on the environment and local communities. To encourage them to ‘be better ancestors’, in other words.
Sometimes, businesses can be focused solely on the short term – perhaps because they feel pressured to deliver immediate returns for their shareholders. The trouble with this is that the things which deliver longer term benefits – like investing in innovation, workforce skills or the efficient use of natural resources – can slip down the priority list as a result.
As do the societal and environmental impacts of carbon emissions and air pollution.
At Aviva, we believe that responsible investing is Good Thinking, plain and simple. Not only can the investments we make support the transition to a low-carbon economy, but also we use our influence to encourage businesses to take a longer term view and act now on the issues that affect us all.
And the good news is it’s not just big companies like Aviva that can have an influence. Because you can too.
How can you support responsible investment?
Pension funds invest the savings of millions of people, which gives you huge power. If you insisted that your money was invested responsibly, it could have a transformative effect, unleashing trillions of pounds in investments that protect and improve people’s lives.
And that’s where you can make a difference.
As a pension saver, you have the power to influence where your funds get invested. Ask your pension provider how your money is invested and they should tell you. They should also be open with you about how they’ve voted at companies’ annual meetings on the issues you care about.