Looking at environmental and social sustainability and making sure companies have governance in place to improve that sustainability year on year. Photo credit: Shutterstock
Hencilla Canworth, who administer the MU members' pension scheme, have been working to improve its environmental footprint and adopt an ESG investment strategy. They also look after pension schemes for Equity and BECTU among others and are undergoing this process for all their clients.
ESG stands for three key factors used to assess corporate behaviour - Environmental, Social and Governance.
Environmental – This concerns interaction with the physical environment, such as climate change, biodiversity, natural resources, carbon emissions, air and water pollution.
Social – This looks at the impact on society and communities, including human rights, health and safety issues, labour standards, product liability, privacy and data security.
Governance – This focuses on how companies are governed, including diversity, transparency, ownership, board independence, ethics, executive compensation and so on.
So, ESG investing means investing money as sustainably as possible in every sense of the word. It looks at environmental and social sustainability and makes sure companies have governance in place to improve that sustainability year on year.
The difference between ethical and ESG investment strategies
Ethical alone often means filtering out certain companies who do not meet predetermined criteria
ESG actively seeks these companies out and by investment in them strives to change them. Non-compliance leads to highly visible divestment, which typically is very painful for the company concerned.
So by choosing a fund that has a strong ESG investment strategy as a default or giving members the choice to switch, we can help to put pressure on companies to continually improve and lessen their environmental impact.
As you can see from the above, ESG is ethical and more. And it is objective – ideal for a default fund.
The Default Fund will now be ESG focused
Hencilla Canworth have announced that, with effect from 1 October 2021, a new Default Fund is in place for the MU Members' Pension Scheme and this is the ESG focused AVIVA Pensions Diversified Assets Fund 2 Series 6.
It has the same risk rating as the previous fund, has a governance committee and meets the legal requirements of our schemes.
All new members, unless they choose otherwise, will initially be invested in this fund.
For existing scheme members, the situation is as follows:
- Those who have chosen to invest in funds other than the default fund will remain untouched
- Those who have joined the schemes over the years and remain in the default fund from the outset will be contacted by AVIVA advising them that by a certain date, their pension funds will be moved to the new default fund unless they wish otherwise.
It is hoped that this action will have the result of more than £150 million becoming ESG focused in one action. Great news for the schemes and great news for the planet too.
Find out more about how green pension investments can be the most powerful thing you can do to protect the planet.