Divest or engage?
ESG matters are increasingly important in both retirement and investment planning
Environmental, social and corporate governance issues are increasingly in the news, with some high-profile companies facing public scrutiny, corporate action or litigation. In a world where doing good means a better, more sustainable future, environmental, social and governance (ESG) factors have become an essential measure for sustainability and ethics of a business.
Pension schemes are an important part of the investment chain, and according to new research nearly three quarters of women aged 40 and over would divest their pension from companies with poor corporate governance pay practices, led by 74% of female ‘Baby Boomers’ (aged 55–65). The majority of men of the same age group agree, but younger women are split 50:50.
POOR PAY AND GOVERNANCE PRACTICES
An overwhelming majority of older women would divest their pension from investments in companies with poor pay and governance practices. Women aged 40 and over are much more likely than men of the same age group to agree with such steps, with a slimmer 59% majority of men of the same age willing to do the same.
Within the older female age group, 74% of female Baby Boomers and 73% of women belonging to ‘Generation X’ (aged 40–54) would invest less, or not at all, if they knew their pension was invested in companies that have attracted criticism for their governance and pay practices.
However, younger women are split on the issue. Only half of Millennial women would follow the same policy of cutting out these companies from their pensions.
MORE FOCUSED ON CLIMATE ISSUES
The findings highlight a strong contrast between the relative importance of social and governance issues to older generations, and the views of younger people, who are more focused on climate issues.
Many Millennials (aged 25–39) want to divest their pensions from the fossil fuels industry. Millennials are more likely than any other generation to want to reduce their exposure to the fossil fuel industry, despite any potential consequences. Even if there was a resulting performance impact, 45% of Millennials would opt to divest their pension from fossil fuels.
This compares to 30% of Generation X, while Baby Boomers (at just 23%) were half as likely as Millennials to divest from fossil fuels regardless of the investment outcome.
NEGATIVE IMPACT ON PENSIONS
Including a further 41% of Millennials who would only divest from fossil fuels if it didn’t impact investment returns, a combined 86% of Millennials would choose to divest their workplace pension from fossil fuels if it would have no negative impact on their pension. Across all age groups, nearly half of all adults (49%) would prefer a policy of engagement to encourage change before divesting. It is also notable that only half of respondents were already aware of the types of investments within their workplace pensions, implying many more may not be aware of possible inconsistencies between these investments and their own beliefs.
 Fieldwork conducted by Watermelon Research for Legal & General Investment Management: 22–29 October 2019 consisting of 1,000 interviews (online) with UK adults between the ages of 25 and 65, who have a workplace pension and work in the private sector.
INFORMATION IS BASED ON OUR CURRENT UNDERSTANDING OF TAXATION LEGISLATION AND REGULATIONS. ANY LEVELS AND BASES OF, AND RELIEFS FROM, TAXATION ARE SUBJECT TO CHANGE. TAX TREATMENT IS BASED ON INDIVIDUAL CIRCUMSTANCES AND MAY BE SUBJECT TO CHANGE IN THE FUTURE. ALTHOUGH ENDEAVOURS HAVE BEEN MADE TO PROVIDE ACCURATE AND TIMELY INFORMATION, WE CANNOT GUARANTEE THAT SUCH INFORMATION IS ACCURATE AS OF THE DATE IT IS RECEIVED OR THAT IT WILL CONTINUE TO BE ACCURATE IN THE FUTURE. NO INDIVIDUAL OR COMPANY SHOULD ACT UPON SUCH INFORMATION WITHOUT RECEIVING APPROPRIATE PROFESSIONAL ADVICE AFTER A THOROUGH REVIEW OF THEIR PARTICULAR SITUATION. WE CANNOT ACCEPT RESPONSIBILITY FOR ANY LOSS AS A RESULT OF ACTS OR OMISSIONS.
Affinity Integrated Wealth Management is a trading style of Buryfield Grange Limited. ‘Buryfield Grange Limited’ is authorised and regulated by The Financial Conduct Authority. Not all services provided by Buryfield Grange are regulated by the Financial Conduct Authority. ‘Buryfield Grange Limited’ is registered in England and Wales at ‘Inspire House, 20 Tonbridge Road, Maidstone, Kent ME16 8RT Company registration numbers 4568338.
"Many thanks for your part in all this and I will be mentioning, and I trust that this is acceptable to you, to my accountants, Applied Accountancy, that you have given me excellent advice and been most helpful and prompt about it all."
Mr Leigh-Pemberton CBE DL, Kent
"Ian has always been helpful and hugely knowledgeable. I am a woman on my own and I feel that Ian is someone I can trust with my finances as I find much of this area very difficult to understand. He is professional and competent, as are all his staff."
Geraldine, Surrey – Client for 7 Years
"Finances, investments, pensions etc are all complex issues and generally complicated & difficult to understand. We chose Ian Painter of Affinity to manage our savings because he is very professional in his approach and his knowledge covers every aspect of the market to offer the best advice to secure our investments. We are very happy with the service we are receiving from Mr Painter and his team and have no reservations in recommending him to others."
Martyn, Berkshire – Client for 5 Years