How should we talk about Sustainable Pensions - an experiment

 

Investing in companies may sound like a domain for the rich and powerful, but most of the UK population invest regularly. Through auto-enrolment in workplace pensions, the proportion of people putting money into a pension has grown tremendously. But two thirds of British workers may not even know their money is invested, let alone where. And it’s not because we don’t care - more than two-thirds (68%) of UK investors want their investments to be driven by considerations of the environmental, societal, and human rights impact.

Over the past few months, we’ve seen more large investors and pension providers commit to Net Zero emissions targets. In many cases, this is part of a shift towards Environmental, Societal, and Governance (ESG) focused investment funds and accompanies a shift away from other ‘negative’ types of industries.

Such ESG, or ‘responsible’ investment opportunities are exactly what people say they want, but educating people about the impact of their pension, and how they can align their pension investments with their personal values, is a big challenge. How do we communicate in a way that encourages people to act?

 

The Experiment

Every year pension providers send an annual benefit statement to customers, telling them how much they have saved and where their pension is invested.

To assess whether behavioural science and experimentation can help us better engage pension savers we tested three versions of a benefit statement in an online experiment with 578 participants. One was closely adapted from a statement received from a major UK provider in 2020, whereas the other two aimed to explain how pensions are invested, and the impact of those investments, more clearly.

The ‘Do More Good’ version described responsible investment in a future frame, highlighting that it means supporting companies that fight climate change and find cures for diseases. The Don’t Do Harm version took a present frame, and explained that by sticking with the default investment you may be invested in tobacco, weapons, and oil, and that responsible investment means moving away from these. This latter language is more likely to come as a shock to people, but could it also increase engagement with pensions?

 

Our Messages

DO MORE GOOD

The Planet Fund invests your money in companies that:

  • Develop new cures for diseases

  • Protect human rights across their supply chains

  • Fight climate change

DON’T DO HARM

The Planet Fund does not invest your money in companies that:

  • Have high fossil fuel use

  • Produce tobacco or weapons

  • Profit from gambling

Our Findings

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Do More Good improved people’s perception of the pension provider sending the statement.

People who saw Treatment 1, the Do More Good message, were 16% more likely to say the provider cares about the future and rated the provider as more responsible. They also said they’d want their employer to consider using the provider.

"To what extent do you agree the provider cares about the future?" on a 5-point scale from Strongly Disagree to Strongly Agree. Results significant at p<0.001.

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Don’t Do Harm increased the likelihood that people said they would take action and change to a responsible investment fund by 16%

Treatment 2, the Don’t Do Harm message, had a smaller impact on brand perceptions but increased the likelihood that people said they would take action and change to a responsible investment fund compared to. The Do More Good message (Treatment 1) had also increased this, but only by 6.7%.

We also tracked how many people clicked on links to more information about responsible investment and to their pension provider’s portal to measure action as well as intent. Participants in the Don’t Do Harm group were significantly more likely to click on these links (10.9%) than the Do More Good group (3.6%).

"How likely are you to change in which funds and businesses your pensions are invested?" on a 5-point scale from Not At All Likely to Extremely Likely. Both increases are significant, at p<0.05 and p<0.001 respectively.

“The findings of our experiment reveal an interesting tension:

We like hearing about responsible investments in terms of doing more good, but are more likely to say we’ll take action and change our investments if we find out we are currently investing in harmful industries.”

What’s Next?

Our results show that the way we’ve traditionally talked about pensions and responsible investment isn’t enough to truly engage people and spark action. We need to use experiments to carefully test how people respond to different messages, how those responses differ between groups, and how we can actually drive action. Many questions remain unexplored, which means there’s likely to be low-hanging fruit here. For example, 81% of women in our experiment picked the sustainable fund compared to only 67% of men.(this was significant at p<0.001). Recognising these differences when we target communications should be a simple first step.

We want members of the Net Zero Alliance to see themselves as behavioural researchers, exploring the most effective ways to engage people with decarbonisation and the Net Zero Challenge. Ask us how to start exploring the power of experimentation today.

 
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