More than a third (37 per cent) of people would be willing to accept some reduction in their pension savings if their investments were made more ethically, a study by the High Pay Centre and Survation has found.

Of those surveyed, two-thirds (66 per cent) said that they wanted their pension fund to reflect their ethical values and beliefs.

Almost a third (29 per cent) considered insufficient pension savings as the biggest threat to their quality of life in later years, while 21 per cent felt that climate change was a bigger threat.

While 50 per cent of respondents believed that generating returns was an important factor that pension schemes should consider when investing in companies, 42 per cent said that the pay and conditions of a company’s workers was important, while 37 per cent said the same about the firm’s environmental impact and its approach to human rights issues.

The High Pay Centre stated that the findings indicated that many pension savers recognised the link between employment and the environmental and ethical practices of the companies they invest in, although it also found a “limited understanding” of pensions, investments and financial markets.

More than half (53 per cent) felt they had a low understanding of pensions, investments and financial markets, and were not aware whether their pension scheme had an ethical investment option.

Of those polled who had not looked into where their pension was invested, 45 per cent said it was because of their lack of understanding, 40 per cent cited trust in financial professions, and 30 per cent stated it was because they lacked the time.

"In recent years ESG investing has gained considerable prominence, and there is little doubt that pension funds and the investment industry more widely are - in general - increasingly engaging with environmental and social issues,” commented High Pay Centre spokesperson, Andrew Speke.

“But in a world in which around 10 per cent of people live in extreme poverty and the an estimated five million lives are already annually lost to climate change, there is a lot to support the critics who argue that ESG has been more of a superficial marketing initiative than a genuine effort to align investment practices with the interests of people and planet.

“Deeper engagement by pension funds with their members, and incorporating a more holistic conception of members’ interests into investment practices will be a key way of answering these critics."

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