This month Hubbub will be enrolling its employees into a pension scheme, joining the estimated 9 million others due to save into auto-enrolment schemes by 2018.

A whopping £3 trillion of assets is managed by pension funds, making them one of the UK’s largest investor groups. But what does auto-enrolment mean for values-led organisations interested in investing in the health of the environment and their communities, as well as the retirement purses of employees? 

Hubbub’s charitable vision is to bring people together to create spaces where sustainable behaviours can flourish. Core to this is a fundamental belief that the impact of climate change will increase unless we reduce carbon emissions and create a more resilient and environmentally conscious society. 

Does a pension scheme exist that is in line with our core values? And can Hubbub be a ‘force-for-good’ in this area whilst maintaining minimal administrative burden and value for money for the charity and employees? Affordability and ease are important factors for small start up organisations and social enterprises. 

As a springboard for discussion we turned to a ShareAction's Reclaiming Ownership survey of 'Governance and Responsible Investment at UK Automatic-Enrolement Pension Providers', published to guide concerned organisations with their decision-making, taking social, environmental and governance (ESG) factors into account. 

Of the 11 pension providers compared, only three state that they invest in companies or projects that support the transition to a low-carbon economy and only three assess the risk of stranded assets with respect to a company’s fossil fuel portfolios. Only one provider has a measurable target to increase renewable energy generation (Aviva), and although they come out on top they still only score a total of 39/80 in the report. In short, no provider excels across the board.

Why aren’t ESG factors higher up the agenda for pension providers? To safeguard long term commercial interests one would think they’d make investment decisions to mitigate risks such as climate change? After all it has been said to “threaten financial resilience and longer-term prosperity.” 

Looking closer, what’s apparent is the current set up is extremely short-term incentivised, with a carrot stick of bonuses linked to short term gains. As Mark Carney (Bank of England) stated in his speech given at Lloyd’s in 2015:

‘The horizon for monetary policy extends out to 2-3 years. For financial stability it is a bit longer, but typically only to the outer boundaries of the credit cycle – about a decade. In other words, once climate change becomes a defining issue for financial stability, it may already be too late’.

For Hubbub the auto-enrolment decision has not been simple. It’s one of compromise, of balancing priorities on cost and values and accepting that no provider will be the ethical exemplar at the time of joining. 

What’s clear is that there’s enormous scope for pension providers to radically improve their performance in this area. They have a responsibility to speak in a language the public understands, to de-jargonise the process and make it easier for employers and employees to make informed decisions. Even the Bank of England’s chief economist Andy Haldane admits not being able to make the ‘remotest sense’ of his retirement savings.

Through sustained engagement values-led organisations and individuals can perhaps in time demonstrate that the market demand to ‘do good’ with pensions is there.

Want to do good with your pension? Here are 5 pointers to help you get started:

  1. Have a read of the ShareAction report to get an overview of different pension providers and their investment policies.
  2. Consider what areas of investment are most important to you vs the value of your pension.
  3. Speak to your employer about the choices you have.
  4. If you already have an allocated pension provider, you can write to them and request information on their investment policy.
  5. Join a group such as Pension Power Network, set up to help organisations and individuals actively engage with their pensions providers.