AgeWage – the value of consumer values

agewage snip

This article is  by Oliver Tapper, who is currently working with me, taking a year out of University. It represents our thinking on how ESG should be integrated into our business and gives some thought to how our business can help others better understand how green are their pensions.


The purpose and value of ESG to AgeWage

AgeWage is a company with a social purpose at its heart. We are looking to make the world of pensions more accessible and transparent to those who cannot or do not take financial advice. This approach will help people save money and will therefore benefit many people economically. However, as well as providing economic transparency we also have a duty to help people engage with the ethical and responsible side of investing. Responsible investment should be promoted by AgeWage both within the company but also through the service we provide. Promoting environmental and social responsibility within AgeWage is something that should be attractive to us as individuals, to investors and ultimately to consumers. By committing to some key ESG principles we are acknowledging the value your money holds in promoting positive environmental and social change.

AgeWage and ESG

Environmental, social and governance (ESG) in its commonly used sense refers to the policies a company may adopt to make sure it is: investing responsibly, treating its’ workforce correctly and governing transparently. As a start up ‘pen-tech’ our engagement with ESG will differ from that of most companies. As a company we engage with ESG on three levels:

  1. As employees and representatives of AgeWage
  2. AgeWage’s internal structure and policy towards ESG
  3. Our product

Giving value for money is a central principle for AgeWage. But we should see ‘value’ in more than just a transactional sense, it is also about the value that money holds to people socially and economically. Some of our users will be unaware that their pension is invested. As a result there will be a lot of people in default funds investing in companies that perhaps they might not want to be for social or environmental reasons. For some people this would be a valid reason to switch providers or funds and we should cater for these consumers. Valuing the values of our consumers should be a priority for AgeWage in a time where climate change and social issues are cared about more so than ever before.

AgeWage ESG values

I have come up with some main ESG values I believe we have at AgeWage that we can use going forward internally and externally:

  1. Providing value for your money
  2. Providing transparency for consumers through AgeWage and ESG score.
  3. Helping people make informed ethical and economic decisions – Helping people understand the value of your money.
    1. Giving an ESG score that helps them understand, assess and act.
    2. Helping people understand that good economic decisions and good ethical decisions are not mutually exclusive.

Environmental

Social

Governance

1

Providing value for money

Providing support to the 94% who can not or will not take financial advice

Helping people get value for their money is a KPI for AgeWage

2

Providing transparency for customers through AgeWage and ESG scores

We help consumers see the environmental impact their investment is having.

Consumers are able to assess the value for their money and the value of their money together.

3

Helping people make informed ethical and economic decisions

Consumers will be more aware of the environmental impact of their fund and will likely act accordingly

Consumers will become aware that ethical decisions are economically viable. People feel empowered by their pension.

AgeWage facilitates a growth in engagement, understanding and action from consumers.

AgeWage ESG approach

A consumer’s ESG user journey could look like this:

  1. Understand

Provide consumers with the information they need to understand where their money goes when they contribute to their pension. Giving a step by step guide that educates people on how their money ends up being invested and where it is invested.

Eventually we should aim to provide an AgeWage ESG score or comment that helps consumers understand whether their money has been invested responsibly or not.

  1. Assess

Once they have access to the information around how sustainable their pot is they can look at it alongside the AgeWage score. We can also ask them questions about how important ESG is to them so they can assess whether for example they would consider moving from a fund with a high AW score but low ESG score to a more sustainable fund.

We could guide the consumer to come up with their own plan for what they want from their fund from an ESG point of view by using a 1 to 5 importance scale (least important to most important). This would provide us with a score the consumer could work towards as an ‘ESG target’.

  1. Act

After assessing consumers will reach the end of the user journey which is ‘act’. We could present them with the various options they could take from an ESG point of view in order to meet the ‘ESG target’ they have set themselves in the ‘Assess’ section.

Reasons for the ESG approach

But why are we taking this ESG approach?

  1. We have to

The climate change of the last 200 years caused by humans is perhaps the greatest threat we have ever faced. Immediate action is required in order to prevent us exceeding the 2°C limit after which we will do irreversible damage to our planet.

There is more scientific consensus around climate change than almost any other scientific topic. The out of sight, out of mind argument simply won’t suffice. Although climate change will hit the ‘Global South’ hardest initially, all of us will be impacted in different ways.

Here are some stats that highlight the severity of the issue:

  • More greenhouse gases are in our atmosphere than any time in human history
  • Sea levels are rising at their fastest rate in 2,000 years.
  • An average of 21.5 million people a year have been displaced by climate change since 2008.
    • It is likely that these displacements will cause refugee crises and ‘climate wars’ in the future.
  • Global flooding could triple by 2030.
  1. Financial services need to

The last few years have seen a rapidly growing movement in financial service towards ESG policies. This movement for the most part has been driven by the realisation that climate change is economically disastrous. While it would be nice if the move was driven by a less economically pragmatic and more socially minded outlook, the ends may justify the means when it comes to climate change.

At AgeWage we will be undertaking an ESG approach because we want to rather than because we should do.  By providing ESG scores and targets we will be helping people: understand whether their pension is green, assess whether they want to make it greener, and act accordingly.

  1. There is a demand for it

The other reason we have seen a growth in ESG policies is because there has been increased demand for it. As the discourse behind climate change grows, there is a growing realisation that imminent action is necessary and therefore people are being a lot more mindful of their individual carbon footprints.

The irrepressible force of auto enrolled millennials are showing a desire for more socially minded pension investments:

  • Millennial investors are nearly twice as likely as non-millennials to invest in companies or funds that target specific social or environmental outcomes (EY 2017: 2).
  • 68% of 25-34 year olds say it is important that people use their money for the good of society and the wider world (PwC 2016).

Summary

ESG is an incredibly important concept that hopefully everyone at AgeWage is behind. Providing the AgeWage score will undoubtedly have social benefit for many consumers as we give financial information to those who might not have otherwise got it. But we can go one step further by providing an ESG score as we will be showing consumers what value they got for their money (AW score) and what is the value of their money (ESG score).

agewage vfm

About henry tapper

Founder of the Pension PlayPen, Director of First Actuarial, partner of Stella, father of Olly . I am the Pension Plowman
This entry was posted in age wage, pensions and tagged , , , , , , . Bookmark the permalink.

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