People are becoming more interested than ever in sustainability and the environmental, social and governance (ESG) standards of the companies they buy from and invest in. As a member of a workplace pension, you too are an investor. Just like you can make lifestyle choices with the environment in mind, like recycling and reducing your carbon footprint, you can also make sustainable choices for your pension.
What is Sustainable Investing?
At Fidelity, we use the term ‘Sustainable Investing’ to encompass ESG issues and related topics. ESG stands for Environmental, Social and Governance. Analysing ESG factors can be a way to assess the sustainability and social impact of an investment in a company and to identify risks. Fund managers can incorporate this information into their investment process. Some of the things that might be considered are:
Greenhouse Gas (GHG emissions)
Resource depletion, including water
Waste and pollution
Loss of biodiversity
Working conditions, including slavery and child labour
Local communities, including indigenous communities
Health and safety
Employee relations and diversity
Bribery and corruption
Political lobbying and donations
Board diversity and structure
Minority shareholder rights
What about Sustainable Investing and my workplace pension?
As a member of a workplace pension you and/or your employer are contributing to your pension pot each month. When you save into a pension, that money is invested into funds. This makes you an investor, and you can decide where your contributions go. You can opt to invest in the default fund, or you can choose to self-select funds.
At Fidelity, we carefully monitor the funds that are offered through our workplace pensions. We expect all the fund managers we work with to outline how they assess companies on ESG factors. In addition, we require fund managers to measure the effectiveness of their strategy in terms of how it benefits members of pension schemes and other investors.
Read more about our engagement policies and those of our Fund Managers:
Whether you are investing via your scheme's default investment option or you are choosing your own funds for your workplace pension, you can find out more about the funds you are invested in by reading about the investment objectives in fund documentation.
Check your investments
It’s a good idea to regularly assess your investment needs to make sure they align with your overall savings goals. You can check where your Fidelity workplace pension is invested by logging into PlanViewer.
Will it impact investment performance?
A key question when it comes to sustainable investing is - does investing in line with ESG principles mean missing out on returns?
Investing for a future goal like retirement is about compounding growth steadily over the years, creating a snowball effect as interest builds on interest. For fund managers focused on investing for the long term, the quality and integrity of the businesses they are investing in is important.
There is growing evidence that companies with high ESG standards may have the potential to offer investors better returns than other businesses in times of market turbulence. Fidelity research, which looked at performance of 2,600 companies over the recent period of market volatility, revealed a strong positive relationship between a company’s relative market performance and its ESG rating¹.
A company’s focus on sustainability factors is indicative of its board and management quality. In this sense, sustainability is about identifying trustworthy, dependable management with a good track record of delivering business progress and consistent growth.
How does Sustainable Investing Work?
In our video Fidelity Investment Director Tom Stevenson sheds some light on Sustainable Investing and ESG.
1 - Fidelity International Whitepaper ‘Outrunning a crisis: Sustainability and market outperformance’, May 2020
Important information: Investors should note that the views expressed may no longer be current and may have already been acted upon. An Investment Manager’s focus on securities of companies which maintain strong environmental, social and governance (“ESG”) credentials may result in a return that at times compares unfavourably to similar products without such focus. No representation nor warranty is made with respect to the fairness, accuracy or completeness of such credentials. The status of a security’s ESG credentials can change over time. This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to an authorised financial adviser.