Is the future of Pensions green?

Lucy Davison

As many companies increasingly seek to reduce their carbon footprint and operate more sustainably, many have turned to green pension plans to align their retirement benefits with their environmental values.

What is a green pension?

A green pension also known as a sustainable pension is essentially a fund that aims to earn interest for its savers through investment in environmentally-positive, low-carbon companies.

However, some companies may be hesitant to adopt these plans, citing concerns about cost, complexity, or employee engagement.

So, here are five reasons why you may think you don’t need a green or sustainable pension plan and one compelling reason why you should embrace them.

5 reasons why you think you don’t need a green plan

  1. Cost: Companies may believe that adopting a green or sustainable pension plan will be too expensive and will not provide a return on investment.
  2. Complexity: Companies may believe that implementing a green or sustainable pension plan will be too complex, requiring additional resources and expertise that they do not have.
  3. Employee Engagement: Companies may believe that their employees are not interested in environmentally friendly investments and will not engage with a green or sustainable pension plan.
  4. Investment Performance: Companies may believe that green or sustainable investments underperform traditional investments, putting their employees’ retirement savings at risk.
  5. Market Availability: Companies may believe that there are limited options for green or sustainable pension plans, making it difficult to find a plan that meets their specific needs.

Are these concerns around green pensions misguided?

No, these concerns are valid, but they may not be the best reasons for you to forego a green or sustainable pension plan.

For example, studies have shown that green or sustainable investments can provide comparable or even better returns than traditional investments. The adoption of a green or sustainable pension plan can also help you attract and retain employees who are passionate about sustainability and environmental responsibility.

1 reason why you need a green pension

The most compelling reason for companies to adopt a green or sustainable pension plan is that it aligns with their broader sustainability goals and can help them meet their ESG targets. As companies seek to reduce their carbon footprint and operate more sustainably, they must ensure that their retirement benefits align with those goals. By adopting a green or sustainable pension plan, companies can demonstrate their commitment to sustainability and inspire their employees to do the same. This, can create a more engaged and motivated workforce and enhance the company’s reputation as a responsible business.

This environmentally supportive switch can be validated if/when needed – One of the most overlooked areas of ESG, or Environmental, Social & Governance, is governance. It’s easy to adopt a sustainable attitude, but how can you show these changes in a tangible way?

The Solution

Our Pension providers and our benefits platform, Lumina, can unequivocally report on the positive impact that smart swaps such as a green pension have on both the environment and on employee engagement.

By implementing Amba to manage your pension plan, employees can opt-in and amend their pension contributions flexibly, and regularly.

By allowing your employees to opt into salary sacrifice (take a look at our blog on salary sacrifice), you can generate guaranteed savings which can be reinvested into the running costs of employee benefit platforms and programs.

It’s understandable companies may have reasonable and valid concerns about adopting a green or sustainable pension plan (or similar green benefits), such as cost, complexity, employee engagement, investment performance, and market availability.

However, the benefits of adopting such a plan, include:

  • Alignment with sustainability goals
  • Enhanced employee engagement
  • Helping the environment

The benefits outweigh the potential drawbacks. Companies that embrace green or sustainable pension plans can demonstrate their commitment to sustainability and inspire their employees to do the same, creating more a engaged and motivated workforce and positively contributing to our shared responsibility to protect the planet!

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