He also includes engagement strategies versus divestment and key areas they would like providers to engage on, as well as the investment style of the members themselves.
“Also [important is] considering more than just attitude to risk in a conventional sense – what are their feelings towards short-term volatility versus long-term returns?”
Furthermore, it can be hard to generalise the preferences of employees of a single employer, which means “finding a suitable default can be challenging”.
Henderson says the difficulty when considering what challenges employers are facing, and how advisers can help find the right funds, is that most companies will not have considered non-financial objectives when setting up the contract with their provider.
He says: “Indeed, many of these might be very old and predate the recent governance around ESG and climate.
“We [Mercer] have a very good survey to help draw out what’s important to companies or trustees when viewed through an ESG lens. This helps set the tone in terms of implementing the right funds, whether it’s climate-related, social impact or even biodiversity [related].
Shaping the future
It seems with so many variables at play in the workplace pension and ESG debate, there is much to be said for providers’ efforts in ramping up their ESG offerings in a committed way to employers and therefore keeping scheme members happy.
Advisers have a key role in this debate and can help to shape the choices that people make as the growing interest in ESG becomes an integral part of the workplace pension arena.
However, the use of the term ESG as purely a marketing activity or tick-box exercise is something that everyone who is committed to the goal of net zero carbon emissions will need to avoid.
Strategies must be solid to prevent passing the issue – including carbon dioxide emissions – on to another area of the industry or out of the industry altogether.
One certainty is that the ever-present regulations will ensure that pension investments should become more environmentally and socially responsible.
The governance area is demonstrating that many parts of the workplace pensions industry are working together to strive for change.
It is hopeful that the providers, employers and advisers can work together to enact enough change in time to make the global impact of ESG issues in the large amount of workplace pensions positively certain.
Ruth Gillbe is a freelance journalist
