Can your SIPP investment make an impact? Pension Bee says it can.

Like many people , I want my money to make a difference – I want to make it matter. But until recently I had only the vaguest idea of how I could make that happen. I am now able to understand how a company or fund is looking to make reduce emissions through TCFD and I hope to understand what it is doing to restore and improve natural capital through TNFD. Though not an expert, I do now feel I have the tools to make informed decisions.

I’ve been saving for my retirement for over 40 years but it is only in the last five that I’ve been able to direct my money to funds which invested in the equity of companies that made a difference. I started by shifting money from a global equity index tracker to L&G’s Future World fund and have recently moved more money into it’s Fossil Free Fund.

Both funds are trackers . depleting their investable universe by excluding certain stocks – in the case of Future World, harmful investments in organisations such as arms manufacturer Raytheon. The Fossil Free Fund excludes companies making their money from the extraction and sale of high carbon sources of energy. But I have worried that such funds are defining themselves by what they don’t invest in, not by what the do.

That’s why I am interested in a new approach to managing my money offered by Pension Bee, what they call their impact plan. Instead of weeding out investable, this plan starts by considering 1,000 companies that are considered to be making a positive impact and finishes by selecting 222 of them for inclusion in their fund.

The plan is a response to the requirements of Pension Bee’s focus groups who said they wanted

high impact conviction, strict exclusion criteria, robust and transparent inclusion criteria, hundreds of holdings, investment in publicly traded companies, a low concentration of individual stocks, ability to generate competitive financial returns, cost-effective pricing under 1% total charges, and ambition to align with future legislation on sustainable funds.

In a week when Vanguard took a step backwards from engaging with these issues, it is good to see a British SIPP listening to its customers

I met with Pension Bee’s Romi Savova and Clare Reilly to discuss how they went about meeting this demand. They started in the Autumn of 2021 and were told by a number of managers they were asking for too much for too little.

Only BlackRock were prepared to create a pooled fund that met these criteria and I suspect that was because only BlackRock has the scope of global research to work from. BlackRock build active portfolios for their clients by using their financial muscle to seed the fund with investments from day one which are chosen through a process they call optimisation.

Pension Bee set the levers for this optimisation that centered around companies that showed high conviction without courting controversy, Tesla was a casualty of this selection process.  Weightings of money towards stocks were made by the BlackRock fundamentals team headed by Eric Rice

Pension Bee’s blurb tells me

Companies in the Impact Plan are working to support underserved communities and tackle unaddressed challenges, to help improve lives and create a better planet for us all to live in.

This could mean investing in companies helping to provide education and affordable housing or develop green energy and sustainable food and water to name a few examples.

And crucially those companies’ impact on people and the planet can be measured so you know they’re contributing to real change.

Technically, this is a pooled fund that can be invested in for an all in cost of 0.95%, it is actively managed to beat the MSCAI ACWI by between 0-2% each year and at present, Pension Bee is the only investor.

Pension Bee subscribes to the ISS SRI voting principles which is how it exercises its influence on Blackrock’s passive funds. The Impact Pension Plan is subject to a more intense degree of stewardship from BlackRock which Pension Bee will not directly influence.

My conclusions

It is fashionable at the moment to seek added return through investing in private markets. When done well this can be very profitable. But investing  in private markets requires economies of scale not available to Pension Bee and its investors nor indeed to all but a very few DC funds (think Nest and a handful of other workplace pensions). Private Markets require immense research or run the risk that assets are bought at the wrong value and end up being sold at the right value – for less than expected.

Pension Bee’s investment philosophy is to stick with the transparency that comes from public markets and to get scale from its fund managers (L&G, State Street and BlackRock). Pension Bee is itself a publicly quoted company so you can follow its share price every day.

For what Pension Bee’s customers are asking for, this looks a good solution. The management is being delivered at under 1%, there is diversity of stocks and the optimisation process is well known and well trusted. The fund is looking to outperform its index but is not giving itself targets that might force it to chase risks that would most probably be unrewarded.

When I go about my business, I hear a lot of cynical comments about the “Yellow Peril” and criticism of its populist approach to marketing with it’s relentless drive to help us combine our pension pots.

When I spend time with Pension Bee , I find an organisation that takes its customers very seriously, responding to what they ask for and battling with the fund management industry to deliver answers to their customer’s requests.

I wish the Pension Bee Impact Fund well as I do the company and its shareholders.

If, like me, you are keen to find the best place for your money, you might like to check the Pension Bee Impact Plan out via this link.

About henry tapper

Founder of the Pension PlayPen,, partner of Stella, father of Olly . I am the Pension Plowman
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