Want to live more sustainably in 2023? Your pension could be the answer

As we usher in a new year, new opportunities for growth and change come our way.

You may have set the age-old new year resolutions, such as exercising more, eating more healthily, or sticking more strictly to your monthly budget.

Another popular new year resolution in this day and age is to live more sustainably. The climate crisis is underway, and each of us would admit that we could do more to help our planet where we can.

When researching how you can make sustainable changes, you might be surprised to know that your wealth, when invested in environmental, social, and governance (ESG) funds, can make a surprising impact.

Read on to find out how your investments (in particular your pension) can change the world, and how your financial adviser can help you invest your wealth this year.

 

ESG investing can help the planet in surprising ways

If you are searching for ways to use your money for good, have you ever considered that investing it in ESG funds could do just that?

While lifestyle changes like using less fuel and eating less meat are important, investing your money into “planet-positive” initiatives can make a significant impact.

ESG funds can help:

• Reduce deforestation
• Fund research into biodiversity
• Create educational programmes for young people in developing countries
• Ensure fair working conditions and pay for employees around the world
• Promote diversity at board level across many companies
• Aid the development of alternative energy sources.

When it comes to your invested wealth, it’s likely that your pension makes up a large chunk of your portfolio. If you’ve saved determinedly towards retirement for decades and are now reaching retirement, your pension wealth could be substantial.

If your pension provider chooses to invest in sustainable funds, your pension could already be changing the world right under your nose.

 

More pension providers could begin investing in sustainable funds in 2023 and beyond

In recent months, greater attention has been turned towards how businesses and trusts can do their part in protecting the planet – in particular, biodiversity.

The COP15 UN Biodiversity Conference, held in Montreal in December 2022, invited governments around the world to “adopt the post-2020 global biodiversity framework”.

According to the Convention on Biological Diversity, this means governing bodies and businesses must recognise that “urgent policy action globally, regionally, and nationally is required to transform economic, social, and financial models”, so that “the trends that have exacerbated biodiversity loss will stabilise by 2030 and allow for the recovery of natural ecosystems, with net improvements by 2050.”

As a result of these objectives, a report by Pensions Expert claims that while there is yet little guidance for fixed-income investors who wish to angle their investments towards these aims, biodiversity-labelled bonds are more frequently being issued.

So, your pension provider could be committed to meeting these emerging criteria, and may already be setting those investments in motion. For example, another Pensions Expert report reveals the £2 billion master trust, Smart Pension, made its first green bond investment through the Mirova Global Green Bond Fund in December 2022.

You might be wondering: “what could this potential change in direction mean for my pension’s returns?”

The short answer is: there is little need for concern. Your pension provider’s first priority will always be to place investments in potentially lucrative positions to maximise growth. As always, past performance is not a reliable indicator of future performance, and just like all investments, the value of your pension can go down as well as up.

So, this year, green bonds could take pride of place in your pension provider’s list of goals – meaning your pension fund, while providing for your family’s future, could help the future of the planet too.

 

Research shows sustainable investments can have an even bigger impact than lifestyle changes

While there is a clear path being trodden towards investing in green initiatives all over the world, the question remains: how effective are these investments in enacting real change?

According to studies by Aviva, Make My Money Matter, and Route2, published by Money Marketing, the effects of “greening” your pension can be even more noticeable than making lifestyle changes.

Their research found that:

• Those with a UK average-sized pension, when switching to a sustainable fund, could save up to 19 tonnes of carbon a year
• Savers with a larger pension pot of at least £100,000 could save 64 tonnes of carbon a year – equal to nine years’ worth of carbon footprint for the average UK citizen
• Greening your pension can be 21 times more powerful than stopping flying, becoming vegetarian, and switching to a renewable energy company combined.

These astonishing findings have caused many industry leaders to call for an environmental makeover of UK pensions as a whole.

For instance Richard Curtis, who co-founded Make My Money Matter, said, “Our pensions are the most powerful weapon we have to help protect the planet.”

If you are wondering how green your pension is, it could be beneficial to contact your pension provider. For guidance on this matter, contact your financial adviser today.

 

Your financial adviser can help you make sustainable investments throughout your portfolio

If this article has struck up an interest in sustainable investments for you, we can help.

Whether you want to “green” your pension or make sustainable investments elsewhere, your financial adviser can talk you through the process. While past performance is not a reliable indicator of future performance, and returns are never guaranteed, some ESG funds have outperformed their non-ESG counterparts in recent years.

We understand that your financial goals are unique, so by working with us to make your investments greener, you can gain peace of mind that your wealth objectives still remain at the forefront of the conversation.

 

Get in touch

For a conversation about making your pensions and other investments more sustainable, contact us today. Email info@chancellorfinancial.co.uk, or call 01204 526 846 to speak to an adviser.

 

Please note

This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

A pension is a long-term investment. The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Your pension income could also be affected by the interest rates at the time you take your benefits.

The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.