Aviva ESG default scheme welcomed in the face of pension inertia

Responsible investing is no longer a ‘nice to have’, company says


Aviva’s decision to launch a default ESG scheme in its workplace pension has been welcomed in the face of “pension inertia” whereby most people will never change the funds they are first put into by their employer.

Aviva has announced businesses will be able to use the Stewardship lifestyle strategy as their default or offer it to employees as an alternative to their existing default.

The Stewardship funds are managed by Aviva Investors (AI) and its global responsible investment (GRI) team and led by chief responsible investment officer Steve Waygood.

“As a result of auto-enrolment and the boom in pension saving, more and more people are now investors. Their hard-earned savings can be used to make the world a better place,” Waygood said.

Pension inertia

EQ Investors impact specialist Louisiana Salge welcomed the launch stating more needs to be done in the investment industry to incorporate impact/ESG investment choices into defined contribution pension plans.

Auto enrollment has seen occupational pension scheme membership reaching a record of 45.6m in 2018.

Salge said: “Studies show that most people have pension ‘inertia’ which means they will never change from or question the default investment option to their pension.

“Thus, making the default option a more responsible strategy can be a lever to shift large amounts of pension capital to more sustainable businesses, and thus use market signalling effectively for sustainable change. We would obviously need more pension providers to adopt this too, to create the necessary momentum.”

ESG moving in to mainstream

Aviva said this is the first time a strategy has been based solely on the stewardship funds.

Whitechurch head of sustainable responsible investing Amanda Tovey said: “It great to see increasing choice in the pension space for SRI and ESG investment options and this ability to set as a default option demonstrates how this area is really moving into the mainstream.

“By making this available as default option it will hopefully encourage people to think about this as an option for other investments they may hold such as Isas.”

Salge said investors will begin to expect social impact investment to become a routine offering in due course. “It is therefore important that workplace pension providers understand that there are both social reasons to offer these types of products and also potential risks in not doing so.”

Matt McGill, head of workplace propositions at Aviva, added: “Responsible investing is no longer a ‘nice to have’. We want to offer people a simple but effective way of ensuring that as they save for their retirement, their investment is being used for the good of society and the planet.”

Stewardship lifestyle strategy

The stewardship strategy has ethical and ESG considerations throughout the growth and consolidation phases.

The funds use a three-layer approach which includes exclusions, engagement and measurement of ESG performance.

Waygood said: “Having the option to invest in companies that are in line with your personal beliefs shouldn’t be reserved for the wealthy or the investment professional. Using the Stewardship funds to create a workplace pension default means more people will now have access to an ethical investment philosophy.”

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