The power of your pension to save the world

Do you know what your pension is being invested in? So many of us don’t, and when we lift the lid often people are shocked by what they find. I spoke to David from Make My Money Matter, a campaign to help bring awareness to the potential of pensions to have a huge positive impact in the world. If you’re running a purposeful organisation, or if you’re an individual with a pension invested somewhere through your organisation, read on to find out more about how you can use the biggest investment you’ll ever make for good. If you want to watch the full interview you can do so here.

Skye: So, David, would you be happy to share a bit about Make My Money Matter and how it got started, and the problem that you're trying to solve?

David : We were set up with the real purpose of helping members of the public in the UK better align their personal finances, their bank accounts, their savings, but most importantly, for us, their pensions with their values. By and large, most people in the UK really don't engage with their money. There's a kind of phobia of talking about money and a lack of understanding about how financial systems work and what that leads to is a situation where you have individuals across the UK who are taking really important everyday steps particularly around their carbon footprint and their impact on the world around them to represent their values in their day-to-day life. That includes changing their travel patterns, changing their consumption patterns, and changing the food they choose. But there's a real disconnect between what we do with our day-to-day lives and what our money does oftentimes behind our back without us really knowing it.

And so that situation means that you've got vegans in the UK who are investing in the meat industry, for example. You have extinction rebellion protesters who are heavily invested in fossil fuel companies. You have doctors and nurses whose pensions may be contributing towards tobacco or causing diseases which they themselves are then fighting.

And so we think there's a real problem between day-to-day decisions we're making as individuals and what our money may be doing when we're not looking. We want to tell people about how their money can actually be a really positive force for good and for change in the world and get people excited about that. Ultimately using that awareness to engage the pensions industry and the financial sector to do more with the money to invest it more sustainably and more ethically long term.

Skye: It sounds very important, but it also kind of freaks me out that there are so many of us who don't know about this. As you say, you try to make decisions that are aligned with your values and this seems like a big blind spot. Do you feel that?

David: Absolutely. There's a huge knowledge gap, and this pretty much goes all the way through. Overall financial literacy in the country and across the world actually is really poor in general.

Education systems aren't set up to really help people understand the nuances of financial management or pensions or investments. So there's a base level lack of knowledge, which cuts across many people. And then there's a gap between how people think about their money and the impact it has on the world. Most people, particularly with pensions, will consider that their money is sat in a bank vault in Switzerland, slowly accruing interest. And then in 50 years time, they'll be able to get a check every year, which will help them live their lives in retirement.

The reality is that our money is not static, it's active. It's invested for good and for bad all around the world. It's helping create the world we are living in right now. And there's a real gap in terms of awareness and knowledge, both in terms of the fact that that is happening in the first place, but also that through our pensions, through our bank accounts, through our savings, we are actually shareholders and stakeholders in these companies. And therefore we have a say in how they manage and how they run and the kind of impact they have in the world. So we've actually have a hidden superpower, which we've never really utilised or tapped into to build a better world. That's what this campaign is all about. 

Skye: So if I'm running an organisation and I'm thinking, Oh my gosh, and I don't actually know what our pensions are being invested into, how easy is it for an organisation to change that or to get involved?

David:  You have progressive organisations coming up with sustainability strategies, plans, targets and net-zero commitments, but only about 5% of those make any efforts to align their pension contributions with those sustainability strategies.

There are companies who may be changing their travel policy to get rid of flying from their company travel plans, but who will be funding the airline industry through their company pensions. And you've got organisations who are committing to only serve vegetarian food in their canteens and in their lunch orders, but have continued to fund the meat industry through their pensions. 

And so there's this accidental hypocrisy or dichotomy play between where your money goes and the commitments you make. We think it's really important for organisations to align their company pension schemes with their values and their commitments.

How easy it is and what can be done? It does depend on with whom you have a pension, what offers are available too. But I think the first thing to do is to ask the question of your pension provider, where is our money invested? What kind of impact is it having and are there alternatives for our staff available? So first is to understand, are there more sustainable funding and more ethical funds they may offer, which you would feel more comfortable with? Which more closely align with your organisational funding? And sometimes providers will have those options and you can explore those.

If there aren't, then you have the choice. See whether you can move to a different provider who will offer you that, or you can join us in terms of what we're trying to do, which is to raise the profile of the issue and amplify it.

If there aren't good, sustainable options for you to invest in you should be shouting about this and talking about this and raising this on all the forums you have. We want to be bringing together lots of high-profile organisations together and say, you know what? We don't feel there are sufficient options for us that match the direction of the world.

Ultimately we want all pension funds to be investing more sustainably. And the only way to do that is by making noise, showing that there's demand for this from their customers. So I think businesses can really engage their pension providers, join our campaign, talk to their staff about how important this is and see if there are specific options available for them.

Skye Robertson: It seems like there’s a huge opportunity for impact here...

David Hayman: There's a lot of money that is going into pensions every year. It's about 20 billion pounds a year being invested in our pensions through company pension schemes, that's a huge amount of money that could be directed into better ways. I think that could make a really big difference.

Skye Robertson: What sort of things would a responsible pension fund be investing in? What kind of things would they be involved in?

David Hayman: I think there's a couple of levels to it. I think one is a kind of 'do no harm' approach. Which is getting out of some of the worst polluting or the worst-performing companies against certain kinds of social indicators.

So you can get out of the highest polluting industries, for example, or transition to companies who are looking at gender, looking at diversity, looking at representation across the board. There are lots of screens you can apply to filter out companies you don't feel comfortable with. Then there are opportunities to start investing more positively and looking at investing in solutions to some of the problems we're facing. An obvious area is renewable energy. It gets a lot of attention and gets a lot of increasing investment. One of the biggest pension funds in the UK just announced a huge, additional investment in renewable energy for its members this week. So that's a pretty big step.

You can invest more in medical services and healthcare and research and development. Invest in education, invest in local infrastructure, invest in companies that treat their workers well. Invest in companies that have to have commitments to equal representation on boards for gender and diversity. There's a lot of different angles to play. When you're talking about investing with ethics or morals or responsibility, lots of individuals come with a different lens to it.

You may care particularly about not investing in alcohol. And I make a particular about not investing in gambling and a friend may care about not investing in tobacco because they've seen the health consequences on friends and family. We don't want to be overly prescriptive and say, no one can invest in X, Y, and Z, and they must only invest in ABC.

I think the important thing is getting people thinking, asking the question and finding solutions which they feel more comfortable about. And the reality is right now that when people find out where their money's going, they're not overly comfortable with it and they want different options.

Skye Robertson: You make a great point. If you don't have a lot of disposable income to be investing or donating to things that you care about, this is actually a really good way of being able to do that. I hadn't ever thought about that, but that strikes me as a really nice way of aligning. Regardless of what your financial circumstances might be.

David Hayman: Exactly. And we definitely don't want to see this as giving up anything. The evidence will point to the fact that more sustainable or ethical funds have matched or outperformed the default funds over the past 5-10 years. So it certainly isn't about giving anything up. It's not about charity. It's not about giving away money for a good cause. It's really about making sure that your money is being stewarded in a way, which is good for you and good for the planet and good long-term. And we think there's a real kind of sweet spot in that area, which is good investments that make good returns for their members and for the planet.

For many people, a pension will be the largest investment that any of us hold in a lifetime but we have absolutely zero engagement with that money. It can be a huge pot of money for lots of people and we just outsource it and we don't think about it. We put the letters in a drawer somewhere and we ignore it year in, year out.

And actually, it can be one of the most effective things we have at making a difference in the world. Right now we're not kind of tapping into that power yet, but we think we can.

Skye Robertson: We know that regulation can have a huge impact on how much has been done to progress an issue. Do you think that obviously, one step is for the government to default to an ethical pension? If you're running a business and you don't have time to think about it, you just kind of want to pick whatever's the default option.

Do you think that that regulation has a part to play in encouraging more organizations at least to sign up kind of defaulting to a positive option, or do you think that it could go further? And if so, what, what do you think could be done?

David Hayman: Something we've been pushing for is governments mandating that pension funds and more broadly, financial institutions commit to net-zero targets.

We think that's a really, really important, critical step for the pension industry and the wider financial sector to take. We've had some voluntary commitments coming out over the last couple of months, and since we launched our campaign, we've had I think 14 pension providers come out and commit to net zero, which has been huge for us, including a Aviva, Scottish Widows, Nest and others.

It's a brilliant step. Hundreds of billions of assets under management now committed to going to a net-zero trajectory, which means a significant cutting of emissions from across their portfolio. But we think everyone should do that. And we think if people aren't acting or they're failing acting quick enough, the government can make a really strong signal by mandating that pension providers and the wider financial sector align with net-zero targets.

We've got the cop climate conference in Glasgow in November this year, it's a really important moment for the climate community. That's a huge opportunity for the government to take leadership and show that we can have a green, clean, sustainable financial industry. And the UK can be a world leader in that.

I think the pension funds making those commitments show there's appetite and within the government can kind of go a step further and mandate that. So everyone comes on board as well.

Skye Robertson: Let's say that I'm an employee of an organisation that does not have a green or ethical pension, or isn't thinking about this and is investing in things that you don't feel comfortable with.  How would you go about encouraging your organisation to get on board with the work that you're doing?

David Hayman: I think there are a couple of entry points. The first is around consistency and authenticity as an organisation. I think I would go back to, what are the values of that organisation? What are the sustainability targets or commitments of that organisation? What is the aspiration of that organisation? I know not all organizations will have all of those things, but most organisations will have some combination of those things which help to define them. Put them next to where your pension fund will be investing your money and say, are these two things aligned? Are we comfortable with this? Is it consistent? Is it authentic to our brand? 

Most of the time, the answer is probably not quite and there's more to be done.  I think framing it not as Make My Money Matters says, everyone should do X, Y, and Z, or anyone said that you should do X, Y, Z, but we, as an organisation are committed to these goals and espouse these values, are they reflected in everything we do?

Are they reflected in where hundreds of thousands, millions, tens of millions of pounds of pension contributions are going each year? And if not, we should make an effort to do something about that. And I think that's the kind of soft approach. I think there's also something, which is to say that this is going to be a really important issue for your staff, and for your customers in the future.

I think you see how brands can be called out and can be challenged when they're not living their values. When they're being seen to be kind of greenwashing or jumping on board the bandwagon for the sake of it and putting out social media posts about gender and diversity, but not living those values within their organisation. I think it's going to be the same with money.

I think if people are espousing sustainability commitments and targets, but that is being undermined by where the money is going. Then they're quite exposed to brand backlash from employee and customer concerns. I think it's a really important value proposition, brand proposition, business proposition for all organisations to think about.

And then the last thing I'd say is I mentioned earlier that the positive thing is there are lots of organisations really looking at how they can have bigger impacts in the world. And this is one of the ways where you can have a huge impact with actually relatively limited lift on your side.

Like I said, there are 20 billion pounds going each year from corporates into pension schemes. And that's a huge amount of money which can be directed to building a better world. And that's a really exciting proposition I think for businesses.

Skye Robertson: Are there any inspiring stories that you've come across of either organisations that have started to engage with this and seen a positive impact in their teams and how that how that's been received internally or just generally that you think would be nice to highlight?

David Hayman: One of the most amazing stories that I've come across in this work is not actually from the UK but in Australia. There is an Australian doctor and oncologist who specializes in lung cancer called Dr Bronwyn King and she has spent her life treating the victims of lung cancer.

And when she sat down with her pension advisor 20 years into a career, she asked “where's my money invested?”, And she found out that three of our top five holdings were in tobacco companies.

So throughout our career, treating the victims of lung cancer caused in large part by tobacco. She had been funding those very industries and contributing to those diseases. She was, as you can imagine, horrified learning this. She began to look into the issue and eventually co-founded something called ‘tobacco-free portfolios’, which exists to get pension funds and other large financial institutions to stop investing in tobacco. Both because it feels like it's a bad financial investment and also because of the obvious negative health impacts on the world and has led a campaign, which has had trillions of Australian dollars and committed to divesting from tobacco holdings.

And I think it's just a brilliant story because it so powerfully illustrates the dichotomy between your day-to-day life and the power of your money and what it may be up to.

And also the potential of positive impact you can have. If you start looking into this, if you start putting pressure on, if you start questioning the system changes possible. And she did a Ted talk, so I'd encourage anyone to have a look at that. Her name is Dr Bronwyn King.

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A huge thanks to David for sharing his knowledge with us. To learn more about Make My Money Matter and the issues discussed please visit Make My Money Matter's website and get involved.