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Demand for ESG criteria in pension scheme investment choices soars

New research from Buck, the integrated HR, pensions, and employee benefits consulting, technology, and administration services firm, has found that 67% of companies now expect to include environmental, social, and governance (ESG) criteria in their pension scheme investment choices. The findings are part of Buck’s new whitepaper on employer attitudes toward defined contribution (DC) pension schemes, DC Pensions: The Big Picture.

New research* has found that 67% of companies now expect to include environmental, social, and governance (ESG) criteria in their pension scheme investment choices. The findings are part of Buck’s new whitepaper on employer attitudes toward defined contribution (DC) pension schemes.

In 2018, Buck found that only 28% of respondents expected to include ESG criteria in their pension scheme investment choices, demonstrating the significant shift in attitudes that has taken place over the last 4 years. This trend in DC pension scheme investment reflects a wider change as companies continue to develop their corporate social responsibility policies and seek to promote cultures which embrace diversity, equity and inclusion.

Support for ESG provisions was high among respondents and 44% said that the default fund should incorporate ESG principles. 60% of respondents also said members should be able to choose investment options which reflect their religious or social beliefs. The U.K. has been one of the fastest countries in the world to adopt the recommendations of the Taskforce for Climate Related Financial Disclosures (TCFD), which has certainly played a part in sharpening the focus on ESG matters.

Mark Pemberthy, Benefits Consulting Leader at Buck in the U.K., commented: Support for responsible investment has strengthened significantly, up from 28% of respondents in 2018 to 67% in 2022. It’s encouraging to see that workplace DC pension schemes in the U.K. are taking steps to reflect this changing sentiment. Communicating  ESG-related activity can also be a fantastic way to increase engagement among scheme members. Pension schemes can use front-page news, like climate change, to link the real world impact of their investment strategy, making it more tangible for members. Tech-enabled impact and voting tools  are a fantastic way to bring this  to life, boost engagement and get real insight on what is important to pension scheme members.”

*Buck

whitepaper here.

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