One of the main challenges for workplace pensions in 2022 and beyond is the need to look at the default arrangements that are currently in place and start working towards more sustainable investing.

Doing so without causing the potential for underperformance and/or higher risk will need a careful balancing act, although environmental, social and governance investing (known as ESG) is much more the norm now than it ever was.

This is only the start of a long process; most of the main workplace pension providers have stated they are targeting a 50% reduction in carbon emissions by 2030.

Many are looking to do this by developing and implementing carbon reduction targets into the funds used as their default arrangements, using two investment methods known as ‘tilting’ and ‘excluding’.

Tilting essentially involves a bias towards funds that incorporate some type of ESG screening and/or have a decarbonisation strategy and excluding involves removing exposure to specific markets. For example, NOW:Pensions ended direct exposure to oil and gas in 2020.

Omnium Benefits is currently in the process of implementing adjustments to its Annual Review service to take into account ESG. These changes will ensure that all clients are fully aware of the impact on their employees’ pensions and what to look out for in the coming years.

We can help

ESG is the future of investing and something we all need to embrace. If you would like to discuss it in more detail and in relation to your organisation’s pension scheme, give me a call on 01483 205890.