A retirement planner’s guide to ethical pensions

Now more than ever, Britons understand the importance of making choices to suit not just their needs, but their personal values and morals – for instance, those that empower social or environmental justice.

For many of us, our pension investments are our single largest purchase or financial asset, and so it is only natural that people may want reassurance that this money is being invested in a way that not only provides long-term growth but also has a wider positive impact.

Positively, there are an increasing number of sustainable pension portfolios available to savers. What can be challenging, however, is finding the right option that not only suits your values, but sets you on track to achieve your retirement goals.

With this in mind, it’s worth bearing in mind several key considerations when seeking to make our retirement portfolios more ethical.

Returns on ethical pensions

A significant factor for more savers tends to be portfolio performance. And this approach is no different when it comes to considering sustainable portfolios.

Although people have become increasingly mindful of how ethical and sustainable their financial decisions are, most simply cannot afford to have pension products that underperform. Indeed, there’s a common misconception that ethically focused portfolios may not deliver competitive returns, and that sacrificing financial results is the only way to keep in line with our personal values.

However, this does not have to be the case. Ethical portfolios have the potential to deliver strong returns as they often invest in innovative and emerging high-growth industries such as renewable energy – but, like any investment, finding the right pension scheme or product is essential.

The greenwashing dilemma

Another point of consideration may be around ethical pensions is the risk of being misled by overreaching claims about the product’s positive impact – in other words, ‘greenwashed’. And this  threatens to erode confidence in ethical investments.

Unfortunately – while the Financial Conduct Authority (FCA) is proposing a package of new measures to curb the issue – there are currently no set regulations around sustainable investing and greenwashing. So, until there is greater transparency surrounding ethical pensions, it is important to carry out thorough research and identify the funds that align with things that provide genuinely positive solutions for people and the planet.

However, this can be a rather time consuming process. This is where independent financial advice plays a vital role.

The importance of independent financial advice

Before making any decision regarding investments – sustainable or otherwise – it’s important to be 100% confident in your knowledge and your choice.

Speaking to an independent financial adviser can help you understand the options and potential benefits of ethical and sustainable pension investments. Moreover, professional advice can help you identify whether a particular fund aligns with both your values and financial goals.

With the right resources in hand, careful consideration of potential pitfalls and with the support of expert guidance, individuals can feel confident that their financial decisions are well-informed and succeed in empowering them to reach their financial goals, all while ensuring their investments truly reflect their ethical considerations.