ESG Investing and Your Pension: Why it Matters

In a world where impact and sustainability are increasingly important, many are realizing that their pension fund can be a tool for positive change. An increasing number of individuals are choosing retirement funds that employ a more responsible approach to investing.


When considering your ideal pension, factors like your employment status, contribution amounts and frequencies, and fund allocations are all crucial. The type of funds where your savings are invested has also become a determinant in selecting a pension plan. It was observed in a 2022 survey by RedC that 80% of respondents were willing to pay higher for pensions that contribute to the betterment of our planet.


So, how can you determine if your retirement fund is truly making a difference?


Understanding ESG Investing

Environmental, Social, and Governance (ESG) investing goes beyond the financial. It aims to create a sustainable future by investing your money into companies and funds that adhere to stringent ESG criteria. This investing approach permits pension providers and investors to funnel your savings into companies that promote positive change.


In practical terms, ESG investing involves channeling fewer resources into harmful companies and more into those seeking to improve the world, hence ensuring responsible growth of your funds. Such investments are often termed “responsible investments.” The Elements of ESG Investing include:


  • Environment: ESG investments focus on environmental aspects like a company’s carbon emissions, energy efficiency, biodiversity, and natural resource usage. In an ESG fund, a polluting company is less likely to receive significant investment.
  • Social: The social practices of companies, such as employee treatment and pay, also matter. Funds following ESG investing principles avoid companies with controversial supply chains or poor health and safety standards.
  • Governance: The manner in which a company is managed is also of utmost importance. Companies are urged to safeguard employee rights, prevent corruption, and foster diversity. Well-run companies are generally more appealing to investors, potentially offering better returns.


Investing your pension in companies with commendable ESG ratings enables you to contribute to a brighter future, ensuring that your retirement years align with your values.


How do ESG investments stack up against conventional pension funds?

Investments in non-ESG funds, such as those that provide products or services detrimental to the planet or society (e.g., weapons or tobacco), are considered high-risk due to their potential for increased stock market volatility and price fluctuation. In contrast, ESG funds lean towards companies committed to ESG standards. As the World Economic Forum reports suggest, ESG funds may outperform traditional funds in the long term due to their association with more socially responsible companies or those posing less risk to the climate.


The Impact of ESG on Your Pension


By consciously deciding how your money is invested, you can help shape a better future. At Riordan Financial we strive to ensure that your pension savings are invested responsibly, favoring companies that uphold ESG standards over those that don’t. We are committed to both increasing your wealth and doing so responsibly. We prioritise investments in companies that take ESG factors into account, reducing support for harmful companies.


Take the Next Step

Should you wish to have you pension or savings polices invested with a suitable ESG focus which can help shape a better future both for you and the planet. We in Riordan Financial can assist you in selecting appropriate options that look to balance “Investment Risks” and “Responsible” investing. This can be done by favoring funds that uphold ESG standards over those that don’t. Thereby allowing you to look to increase your wealth while doing so responsibly.