When it comes to our pension pots, are we truly green?
For the second year in a row, we asked savers from across the generations to tell us how important the environment was to them when it came to their pensions.
The human tragedy aside, the impact of COVID-19 has been felt in many ways. Not least a greater appreciation of nature by those who have managed to ditch the daily commute and enjoy more of the great outdoors. Little wonder then, that according to research carried out among members of our workplace pensions, over two-thirds (64%) have become more concerned about the impact of how we, as human beings, interact with our planet.
How green is green?
Overall, our research showed that members increasingly favour ‘going green’ when it came to pensions. As a result, more than eight in 10 (84%) now want to significantly reduce their pension’s exposure to the fossil fuel industry, in other words natural fuels such as coal and gas. This is up from 78% just 18 months ago.
That said, over half of our members who were questioned said they would only be willing to exclude fossil fuels from their investment portfolios if it didn’t affect their long-term financial performance.
Millennials – still the greenest generation
Of our three generations surveyed – Baby Boomers (aged 55 to 65), Generation X (aged 40 to 54) and Millennials (aged 25 to 39) – the latter group continued to hold climate change in the highest regard. However, among low-paid Millennial women, the financial concerns generated by the pandemic may have been a factor in lessening their resolve to help fight climate change. Millennial men would appear, by contrast, to be as committed as ever to the climate cause – perhaps helped by a more secure financial position.
One of the most surprising findings is that Baby Boomers have had an about-face on climate issues since our last survey. The increased coverage of climate in the mainstream media, including Sir David Attenborough’s award-winning documentaries, was cited as the reason for this new attention. Boomers also expressed real concern about the impact of climate change on their children and grandchildren.
Is the green message clear enough?
Interestingly, it seems the pensions industry has its work cut out when communicating green issues. Across all three generations, there was some confusion about what the words ‘net zero’ meant. Our survey uncovered that one in four (25%) had never heard of the term, and a further three in 10 (31%) had heard of it but couldn’t explain it. A minority of our interviewees were so confused they thought it meant that their money would be earning zero returns.
As a quick reminder, net zero is where the amount of carbon we emit (in the form of factory and car fumes) is matched by the amount of carbon that’s absorbed (by our trees, oceans and soil).
After a simple explanation, members were overwhelmingly in favour of their pension moving in this direction. So, it would seem that crucially, when it comes to our pensions, the barrier to becoming more green is not knowing rather than not caring.
Source: Legal & General Investment Management (LGIM) survey data. The survey was conducted in April 2021 and is based on a population of 3,056 adults currently contributing to a workplace pension.
Remember, the value of any investment is not guaranteed. The value of investments and any income received from can go down as well as up and you may not get back as much as you had originally invested.