In a recent poll by YouGov carried out a survey of 1,183 pension savers conducted by last July. It found that almost two-thirds of respondents thought their retirement scheme should invest in a way that reduced the damaging impact of climate change.
But when discovering what their pension fund is actually doing to make this happen, how will savers react?
A tiny sample of the FT’s readership (18) have commented on an article posted by Chris Flood yesterday. I can’t post the article but I can provide the link which is here.
The story is that Nest has made one of its first physical investments on its way to investing 15% of member’s funds into illiquid assets that have social purpose and help meet Nest’s goal of investing in a carbon neutral way by 2050.
It has begun a £1.4bn green energy push after agreeing an infrastructure partnership worth an initial £250m with Octopus Renewables, a specialist clean energy provider. Rather than investing in a fund, Nest has chosen to invest directly into onshore wind and solar energy projects in the UK and Europe.
Mark Fawcett , Nest’s CIO, sees such investments as generating their own momentum
“Every new renewable energy project provides greater energy security, increases potential returns and contributes to tackling the climate emergency”.
Comments such as this are likely to put up the heckles of commentators who see Nest as being a little too close to the Government’s wider agenda and Fawcett is keen to put distance between Nest’s strategy and accusations of Government interference.
Fawcett told the FT millions of UK pension savers wanted to “play their part” in the green industrial revolution. He rejected any suggestion that Nest had faced government pressure to help fund its post-pandemic recovery plans.
“There was no pressure from government. Clean energy will benefit all our members and we hope this move will encourage other pension schemes to follow”.
Will the public buy this?
Nest now has £16bn under management from over 11 m, savers. Around a third of the available market for workplace pensions has money under Nest’s management. Energizing even a small part of its membership to sit up and take notice of where the money is going , would be some achievement. It will take more than the FT to pick up on what’s going on but if the popular press starts talking about what Fawcett has set in train, there’s no reason to think that people will get interested and that some will have what Laurie Edmans calls a “lightbulb moment” and start taking their pension pot seriously.
But the FT readership includes skeptics who rightly ask questions about whether Nest is working for its membership or for its political paymasters
When considering the investment itself, questions are asked about whether the usual standard of due diligence is being applied – because the green end overrides normal consideration of what’s prudent
and the issues of conflicted governance converge in this excellent exchange.
Why I support the consolidation of DC pensions.
The risk from global warming is going to directly impact Nest’s membership financially and socially. That risk must be set against the risk of precipitously jumping into investments with a low chance of financial success.
Of the various benefits claimed for “economy of scale” in pension schemes, the benefit of good governance is tops. Good governance leads to excellent execution of investment strategies as large schemes should know where “good” happens and know how to hire people who do the job well.
Such should be the situation at Nest and the indications are that Nest are consistently delivering superior returns to its members.
I stand on the side of good governance and transparency to members and other stakeholders.
Despite the obvious conflicts associated with Nest’s debt to the tax-payer and the control the DWP exerts over the composition of the Nest trustee board and executive, we have to accept that Mark Fawcett has the mandate to get on with this job and – so long as he is clear about what is going on – he should be allowed to get on with it.
But the comments from the likes of “MTR” and “insurance broker” are necessary, as is the pushback from Josephine Cumbo and other journalists who see their job as to ensure that we aren’t the victims of green washing. Octopus should do very nicely out of its partnership with Nest, but there appear enough eyes on how it goes to ensure value for members.
The same cannot be expected of smaller DC schemes which is why consolidation is needed.