Over two thirds (67 per cent) of companies now expect pension schemes to offer members environmental, social, and governance (ESG) investment options, up from 28 per cent in 2018, research from Buck has revealed.

In addition to this, it found that 44 per cent of companies think that the default fund should incorporate ESG principles, while 60 per cent said members should be able to choose investment options which reflect their religious or social beliefs.

Buck highlighted the increased interest from employers as demonstration of the “significant shift” in attitudes that has taken place over the past four years, arguing that the trend in DC pension scheme investment reflects a wider change as companies continue to develop their corporate social responsibility policies.

Buck benefits consulting leader, Mark Pemberthy, stated: “Support for responsible investment has strengthened significantly, up from 28 per cent of respondents in 2018 to 67 per cent in 2022.

"It’s encouraging to see that workplace DC pension schemes in the U.K. are taking steps to reflect this changing sentiment. Communicating ESG-related activity can also be a fantastic way to increase engagement among scheme members.

"Pension schemes can use front-page news, like climate change, to link the real-world impact of their investment strategy, making it more tangible for members. Tech-enabled impact and voting tools are a fantastic way to bring this to life, boost engagement and get real insight on what is important to pension scheme members.”

More broadly, the report, Defined Contribution (DC) Pensions: The Big Picture, revealed that only 3 per cent of companies want to focus solely on helping employees save for retirement, with the majority wanting to support all-round financial wellbeing.

Although Buck acknowledged that there was a growing desire to support wider financial objectives in 2018, it argued that the pandemic and cost-of-living crisis have since shone a light on the importance of a more holistic approach to supporting employees’ financial wellbeing.

The report also considered consolidation trends, revealing that the proportion of respondents that want to take direct responsibility for monitoring and managing their workplace DC pension scheme fell from 24 per cent in 2018 to 6 per cent in 2022.

Buck highlighted as evidence of a continued increased desire to delegate formal responsibility of running the pension scheme to external specialists, noting that this is also consistent with the decline of single employer trusts and the continued rise of master trusts.

Given this, it suggested that this will "inevitably" leads to a smaller number of large DC pension schemes going forward, in turn "transforming the DC landscape".

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