ESG and member behaviour

There’s increasing evidence that some people are motivated to take actions and adjust their lifestyles in a way that has a positive social and environmental impact, and some signs that these values are starting to trickle into their financial behaviours. At the same time, the financial services sector is becoming more focused on responsible investment and Environmental, Social and Governance (ESG) factors. These criteria are increasingly used by investors and pension trustees to measure the impact of an organisation’s operations across a wide range of issues, including climate change, sustainability, social responsibility, diversity and inclusion, human rights, animal welfare, executive and employee pay, employee relations, and management structure.

This growing interest from consumers creates a potential route by which people could be prompted to engage more actively with their retirement plans. However, whilst there’s real potential to drive higher engagement by talking more about responsible investment, the link between pension saving and ESG impacts is not necessarily an easy one to make for pension savers. Indeed, a relatively high proportion of automatically enrolled pension savers are unaware that their money is invested at all.

A bridge in understanding may need to be made before the impacts of investments made by pension schemes on their members’ behalf can be communicated. In addition, although someone may express strong values in their everyday consumption choices, these do not necessarily translate into action in aspects of their lives that they typically engage less with, such as pension saving. This is despite the fact that their pension pot is likely to be higher value and more influential than, say, their choice of cleaning products or food and drink. There therefore may be a need to help people make connections between areas of life they are more familiar with and their pension investments.

About the research

Working together with our programme partner, Legal & General Investment Management (LGIM), this project aimed to understand whether communicating with members of a pension scheme about the impact of their investments makes them more likely to engage with their retirement account, and whether doing so has any impact on downstream behaviours such as seeking information, changing contribution levels or making active investment choices.

About our programme partner

Legal & General Investment Management (LGIM) is one of Europe’s largest asset managers and a major global investor, with total assets under management of £1.2 trillion*. They work with a wide range of global clients, including pension schemes, sovereign wealth funds, fund distributors and retail investors.

Throughout the past 40 years LGIM have built their business through understanding what matters most to their clients and transforming this insight into valuable, accessible investment products and solutions. They provide investment expertise across the full spectrum of asset classes including fixed income, equities, commercial property and cash. LGIM’s capabilities range from index-tracking and active strategies to liquidity management and liability-based risk management solutions.

*LGIM internal data as at 30 June 2020. These figures include assets managed by LGIMA, an SEC Registered Investment Advisor. Data includes derivative positions.

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  • Understand how messages about ESG impacts can be most effectively framed and communicated to drive engagement: What language is most compelling? What information needs to be included to boost understanding and attract attention? For example, is talking about individual or collective impact more effective? And, what can we learn from other sectors?
  • Understand any key demographic differences in engagement: Which subgroups of automatically enrolled pension savers could most effectively be targeted with these messages to drive engagement?

Our programme of work combined:

  • a desk research review of communications from other sectors
  • expert interviews
  • online qualitative message development to create and start to prioritise message frames that have the potential to drive positive behaviours.

The first phase enabled us to identify recommendations on how best to communicate ESG factors to drive engagement and helped us to prioritise a small set of developed messages to test more fully through an email based, randomised control behavioural trial in phase two. During this second stage of the research, we tested the impact of specific messages about responsible investment on engagement, measured by open and click through rates, and subsequent downstream behaviours, such as registering or visiting an online account.