How can ESG be incorporated into one’s retirement strategy?

3 June 2022 Reading Time: 4 minutes

Environmental, Social, and Governance (ESG) considerations have been gaining traction within the financial services industry for some time now. The standards expected by socially motivated investors have encouraged financial institutions to take stock of their behaviour and aim for new sustainability goals.

Indeed, recent research from My Pension Expert revealed that pension planners are becoming increasingly aware of the importance of ESG. The survey of 1,003 UK adults with pension savings aged 40 and over found that over two-fifths (43%) of respondents understand what ESG stands for and its importance.

Yet, despite a clear shift in priorities towards sustainability, most savers have not yet incorporated ESG criteria into their financial planning. In My Pension Expert’s survey, just 15% of adults aged 40 and over had considered ESG in their retirement strategy. Further, only 12% stated they conduct due diligence to ensure their pension investments are in keeping with ESG preferences.

As such, these figures suggest there is a knowledge gap that needs to be addressed.

Incorporating ESG into a retirement strategy

Switching to a sustainable pension is one of the most effective methods available to Britons to ensure their money is used responsibly. Indeed, often pensions pots fly under the radar of everyday life, receiving little attention other than perhaps noting the monthly contributions from a salary that will be locked away until retirement. However, behind the scenes, these savings are being invested – potentially to finance unsustainable operations.

For example, according to a recent study, switching to a sustainable pension could save as much as 19 tonnes of carbon a year for those with an average-sized UK pension pot.

Another way of implementing an ESG strategy into financial planning is through sustainable investing. In the current economic climate, more and more people are turning to investments to try to preserve the value of their assets in the face of low interest rates and rising inflation. As such, it’s important to ensure that these assets are invested into funds that help promote sustainable development.

There are a number of ways in which investments can contribute towards sustainable development. This could include anything from investing in renewable energies to finding cures for diseases. Sustainable investing also takes into account business impact; invested funds can help to address critical global issues such as world hunger or healthcare and education inequalities, and businesses that impact the world negatively are excluded.

Seeking advice

When making decisions regarding one’s retirement strategy, it is always best to first seek advice.

Independent financial advisers can play a crucial role in helping planners understand ESG criteria, before taking their preferences and financial situation into account to find the right strategy that agrees with their sustainability goals.

For example, our team at My Pension Expert have the knowledge and expertise to identify the schemes or investments which would suit an individual’s principles, whilst ensuring they achieve the best retirement outcome possible.

ESG will only go from strength to strength over the coming years as pension planners become more conscious about the impact their money has on the world around them. With the help of independent financial advisers, they can be secure in the knowledge that their strategy falls in line with these principles whilst also ensuring that their money is working in the best possible way towards a comfortable retirement.


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