Aviva’s Working Lives Report 2022: The Big Squeeze revealed that a further 19% of employees said responsible investment is important but only as long as it does not impact the performance of their funds. However, over half (55%) of employees do not know if their workplace pension fund is invested responsibly.

Just over a third (34%) of employers think it is essential for the default pension fund to be invested responsibly. However, there are more - just under half (46%) – that think it is important, but not essential.

Maiyuresh Rajah, head of investment strategy and propositions at Aviva, said: “It could be that employees and employers either consider return on investment more important than having funds invested responsibly, or that they see them as mutually exclusive in that ‘you cannot have both’.

“ESG factors are material sources of both managing investment risk and out-performance opportunities for customers. We believe integration and alignment of ESG throughout investment solutions is essential and, over the long-term, will lead to superior investment returns.

“Investment strategies that manage their social and environmental impacts and provide solutions to support the transition to a sustainable future for people and the planet should provide positive investment and sustainability outcomes. The landscape in which companies operate is changing and those that align to the transition and manage the associated risks - be that policy, regulation or reputational - will outperform.”
Climate change was amongst the top three most important things that pension providers should take into consideration when deciding where to invest contributions, according to both employers and employees.

“Employers and employees say that climate change is an important consideration when investing into a pension, but capital needs to be redirected to make an impact. The first step is education. Employers, with the help of pension providers and advisers, have a crucial role to play in helping their people understand the impact they can have on climate-change and society through their workplace pension. Pension providers can help employers make available innovative and engaging tools that can help people understand why responsible investing is important and how their investment funds fare from an ESG perspective.

“It is important to have investment solutions within workplace pensions that integrate ESG factors into the investment process. Having ESG-focused self-select options that people can choose to invest in will be helpful but, considering that most people’s assets are invested in default funds, this is where employers and providers need to be focusing. Employers should look for default strategies that integrate ESG factors across the whole solution.”

Almost two-thirds (61%) of employers think there is room for pension providers to improve their ESG(2) investment options.

Aviva enhanced its My Future Focus investment solution this year and it has, as a result, been recognised as the Best Default ESG Strategy 2022.

Its features include:

• An innovative and dynamic investment strategy with ESG integrated across asset classes.
• ESG integrated into both the actively and passively managed funds that make up My Future Focus.
• A dedicated team of more than 30 ESG specialists who carry out quantitative and qualitative ESG research on the companies Aviva invests in, which feeds directly into the investment teams and the investment decisions they make.
• Investment funds that have specific carbon intensity reduction targets to align them with Aviva’s net zero target for 2040, including interim targets of reducing carbon intensity by 25% by 2025 and by 60% by 2030.
• Effective and impactful engagement and voting – in 2021, Aviva engaged over 2,900 times with over 1,700 companies and voted on over 70,000 resolutions.

Maiyuresh Rajah added: “We believe that as a steward of people’s money, we have a responsibility to act on the issues facing the world today, from fighting climate change to tackling gender inequality. As an investor in businesses across the world and as a major pension provider, we have a duty to build on our track record as a responsible investor and use our resources to deliver long-term sustainable returns for our customers and help to provide them with better financial outcomes at retirement.

“That’s why we’ve made it our priority to integrate ESG across the design and ongoing management of our default investment solution, My Future Focus, and to align it with our net zero ambitions.”