Cost-of-living crisis hasn’t dimmed pension members’ green light for ESG investing

In last year’s investigation into the ESG (environmental social and governance) views of our DC pension members, we expected to find that the cost-of-living crisis was making savers more cautious with their cash.

Yet, in one of the most extensive pieces of research[1] into DC pension savers’ views that we’ve ever conducted, we found that most would pay more for investments which could make them less vulnerable to long-term financial risks.

For instance, of the 3,634 DC pension members we interviewed in the UK, 65% said the rise in petrol, gas and oil prices had made them more interested in replacing oil and coal with sustainable energy sources such as wind or solar farms.

And an even higher number (74%) said that rising food prices had made them think more about how we could sustainably produce food. Women were the most interested in this at 78% compared with 71% of men.

The general willingness to pay higher fees to invest their pension funds in certain ESG initiatives is particularly noteworthy when we think about the economic circumstances under which our respondents were surveyed.

We completed our survey in June 2023, just months after the Office for National Statistics estimated that consumer price inflation was the highest in more than 40 years[2].

And our survey showed that few of those we interviewed had escaped the effects of rising costs and interest-rates. In fact, 90% described themselves as either having less disposable income, just about managing or downright struggling.

Given this backdrop, it appears that our respondents have mostly understood, or are beginning to understand, that there’s a connection between the need to manage environmental and societal risks in case these have a knock-on effect on the long-term stability of the UK economy, and ultimately, on their retirement savings.

Click here to read the full article on our DC ESG investing research

[1] Legal & General Investment Management (LGIM) survey in June 2023 of the views of 4,678 defined contribution workplace pension savers on environment, social and governance investing. Respondents were split across generations and genders and across the UK and Ireland. This article refers to UK data only.

[2] Office for National Statistics: www.ons.gov.uk/economy/inflationandpriceindices/bulletins/consumerpriceinflation/june2023: “The Consumer Prices Index including owner occupiers' housing costs (CPIH) rose by 7.3% in the 12 months to June 2023, down from 7.9% in May, and down from a recent peak of 9.6% in October 2022. Our Indicative modelled consumer price inflation estimates suggest that the October 2022 rate was the highest in over 40 years…”