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Sustainable pensions are advancing, but the real challenge lies in cutting through apathy. Can employers inspire workers and boost engagement?
Sustainability is a growing focus in the pensions sector, with providers making significant strides to reduce their carbon footprints. Despite this progress, employers face significant challenges in engaging workers with sustainable pensions, battling widespread pension apathy and the complexity of ESG (environmental, social and governance) issues.
The importance of sustainable workplace pensions and the challenges of engaging employees with them were the topics under discussion at a recent Benefits Expert roundtable in London. In attendance were:
- Tara Thomas, pensions and benefits manager, Associated British Ports
- Rosie Lacey, head of pensions and benefits, Costain Group
- Mohsin Harhara, head of pensions, Skanska
- Tony Burdon, CEO, Make My Money Matter
First under discussion were the findings from the Benefits Expert Guide to Understanding Sustainability in Workplace Pensions, revealing that workplace pension schemes are decarbonising rapidly and are well on course to achieve 50 percent reductions by 2030, in line with pledges. On average, schemes now produce 61.1 tCO2e/£m invested, with top performers such as National Pension Trust emitting 23.4 tCO2e/£m.
However, a striking gap remains, as the highest emitter, SEI, produces around four times the carbon of the cleanest schemes at 108 tCO2e/£m (view the pdf to see the full table of results).
Nevertheless, it’s clear from the bigger picture that progress is being made. The delegates were in broad agreement that for many employers, the challenge is how to communicate this progress in a way that resonates with employees.
Challenges in engaging employees
A recurring theme among speakers was the difficulty of getting employees to engage with pensions beyond the potential return, with sustainability rarely on the radar. As Rosie Lacey of Costain Group noted: “The company, I think, is more attuned to it than our employees are. I don’t think they actually think about it. So day to day, they’ve got their pension, and that’s fine.”
According to Tara Thomas of Associated British Ports pension engagement is “quite low, in that people just want to know that they’re getting a pension, and they want to know that they’re getting high returns, or at least a pension at the end of the day”.
Even when employees do engage, ESG may not feel like a priority compared to more immediate concerns, and employers take on the duty of keeping tabs on the ethical considerations. As Lacey put it: “It’s almost like a secondary tier. Get them in the pension, they have to be interested, and I’m then reliant on our provider to say, ‘Yes, our default fund is heading in the right direction for ESG,’ because we know that’s where they’ll stay.”
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ESG engagement strategies
Despite these difficulties, some employers have found effective ways to raise awareness of sustainable pensions. As Lacey explained, Costain hosted an ESG week, during which Scottish Widows was invited to present to employees, giving the provider the opportunity to discuss its attitude to sustainability and how it is managing ESG interests.
Another example came from baby food company Ella’s Kitchen, a B Corporation – meaning it meets high standards of social and environmental performance. Tony Burdon, CEO of sustainability campaign group Make My Money Matter, explained: “They looked at the scheme they were in. They didn’t think it was ambitious enough from net zero, and so they hired a financial advisor to look at alternatives. “They got a few of the companies in to make a pitch. They selected one… and employees said it was the best thing management had done for them that year.”
Making pensions part of a broader sustainability narrative within the organisation can also help. Using the example of Costain once again, the employer has undertaken a carbon capture project in association with BP, sending the signal to employees that sustainability is a key focus for the organisation.
Communicating with offline or field based employees is an added challenge for some industries, but one that is being addressed effectively. For example, Thomas explained: “One thing we do have is TV screens up in the mess room, and we’re trying to advertise things on there, which is a good way of getting to people.” Digital tools also hold potential for improving access and understanding. The intranet, for example, can be an invaluable resource for spreading the word.
There are also ways to maximise the impact and make the connection with the organisation’s values, according to Mohsin Harhara of Skanska.
“It’s about conveying the message, but not only in terms of the material of the pensions web pages, but also how it can be framed as an attention grabbing headline on the front page so every employee sees it,” he explained.
“And it could be something like, ‘This is what our values are,’ and also, ‘This is what we’re doing with pensions,’ as well, so it flows.” This approach can also complement a more comprehensive engagement drive, Harhara noted.
“The communication can include messages and presentations,” he explained. “You can have a slide on ESG, employee newsletters with a section on sustainability, good news messages, information where employees can check the ESG credentials of pension funds.”
Building momentum
As sustainable pensions become the norm, employee interest in ESG is likely to grow. Younger generations, in particular, are more aware of sustainability issues and may push for greater transparency. However, employers must balance these demands with the need to deliver strong financial returns.
The speakers agreed that while progress is being made, the journey toward sustainable pensions is far from complete. For now, employers can make the biggest difference by embedding ESG into their broader communications and fostering a culture where pensions are seen as part of a sustainable future. As Burdon concluded: “If you notionally believe that your staff want to be in the right kind of thing, then the onus, I think, is on you to select something that’s doing the right thing.”
