This article was last updated on 05/12/2024
Sustainable investing focuses on funding companies that consider their long-term impact on people and the environment.
There are a number of ways this can be done in practice, but it typically involves either:
- investing in companies that meet a predetermined sustainability criteria, and avoiding ones that don’t; or
- investing in companies that may not be sustainable today, but demonstrate a transition towards becoming sustainable.
The goal of both methods is to make a return on investment, while positively affecting people and the environment.
When a sustainable investment fund sets their criteria, they may consider:
- Social practices - such as providing high employee welfare standards, having adequate board/senior-executive race and gender diversity, and working with ethical supply chain partners.
- Environmental practices - such as reducing or eliminating greenhouse gas emissions, disposing of waste in non-environmentally damaging ways, and producing recyclable products.
As part of their investment activity, the investment fund may employ a team to analyse, report on and engage with the companies they invest in to encourage or challenge them to improve their sustainability credentials.
Interest around sustainable pensions is growing, too. In Episode 2 of our Pension Confident Podcast, our Chief Engagement Officer, Clare Reilly, explains, “we surveyed the same group of customers twice - in 2020 and 2021 - and in 2020 we found that only 34% of them wanted to remove oil completely from their pensions. But we found that it had gone up to 56% in 2021.”
How does a sustainable pension work?
A sustainable pension plan invests its customers’ money in a way that benefits people and the planet. It operates much the same way as a sustainable investment fund, since it’s essentially a type of long-term investment fund - but crucially, savers receive all the tax benefits of a pension too.
PensionBee offers two responsible investment plans especially designed for those who want to invest their money in line with their values: the Climate Plan, and the Shariah Plan.
The Climate Plan invests in more than 800 publicly listed companies globally that are actively reducing their carbon emissions and leading the transition to a low-carbon economy. The Climate Plan is designed to achieve net zero emissions by 2050 through an accelerated decarbonisation strategy. The plan’s objective is to align with the goals of the Paris Agreement to keep the rise in global surface temperature well below 2°C above pre-industrial levels. It does this by continually reducing the total intensity of the GreenHouse Gas (GHG) emissions produced by companies in the plan by at least 10% each year. So, even if the global economy uses more carbon over time, the Climate Plan will move in the opposite direction, always using less.
The Shariah Plan only invests in Shariah-compliant funds, which are a branch of socially responsible investing shaped by the Islamic faith. All investments are approved by an independent Shariah committee, who work closely with the fund managers, State Street Global Advisors and HSBC. Anyone can choose the PensionBee Shariah Plan including those who want to invest according to the Islamic faith as it excludes investments in alcohol, gambling, tobacco, military equipment or weapons, pornography and any products containing pork.
How can you make a positive impact with your pension?
Investing in a sustainable pension plan is as simple as joining any other pension plan, as there are no extra forms to complete or work that you’ll need to do.
If you’re already a PensionBee customer - head over to the ‘My Plan’ page within your BeeHive. Scroll to the bottom of the page and you’ll find a ‘Switch plan’ section. Find your plan of choice and click ‘Switch plan’. You can also do this using the PensionBee app by tapping the ‘Account’ tab and selecting ‘Switch plans’.
If you’re not a PensionBee customer and want to consolidate your old pension(s) - you’ll first need to sign up. We’ll ask you for some information about your old pensions before we can transfer them, and you’ll be able to select the Climate Plan or The Shariah Plan once you’ve signed up.
If you’re not a PensionBee customer and you’re self-employed - you don’t need to consolidate an old pension to sign up. You’ll simply need to visit our self-employed pension page and sign up from there.
Once you’re signed up to the Climate Plan or the Shariah Plan, you’ll be able to monitor your balance, adjust your contributions and plan for the future just like you would with any other PensionBee plan.
Risk warning
As always with investments, your capital is at risk. The value of your investment can go down as well as up, and you may get back less than you invest. This information should not be regarded as financial advice.
