Article | 24/05/2019

Avoiding environmental catastrophe is not just about investments

The following article first appeared in Pensions Expert on 22 May 2019.

Damning predictions on the impending impact of climate change have led to a renewed focus on environmental concerns across the vast majority of industries. The pensions administration industry, however, has been less affected than most.

This could be due to a widespread assumption that businesses needing to alter their processes fall largely in the manufacturing field. In reality, the challenges of climate change reach far further than that.

In October 2018, the UN warning that “we have 12 years to limit a climate change catastrophe” thrust a global climate change movement into the limelight. Now we have protests from groups like Extinction Rebellion directly targeting the pensions industry, and School Strikes for Climate occurring all over the world.

As a result, the news agenda has switched very quickly to discussions on climate change. These conversations have been happening for decades, but never before have they attracted such high levels of attention. And with the impact of climate change worsening by the day, debates like these won’t disappear from public consciousness any time soon.

For this reason, it is hugely important that all businesses are able to stand up to scrutiny about their environmental impact. Not only do organisations have a moral responsibility to take the necessary steps to lessen their carbon footprint, it is also likely that such steps will prove financially worthwhile.

Admin lags on environmental concerns

Business leaders and consumers alike are starting to consider environmental factors during decision-making processes, and it has been predicted that future generations will focus even more on sustainability in their buying decisions – a trend the pensions industry is yet to embrace.

The typical tender for pension administration services, for example, contains an average of zero questions relating to environmental sustainability, carbon reduction targets and strategies for reducing waste.

Pension schemes often focus entirely on the impact their investments have on the environment, with very few trustees thinking about the environmental impact of the operational side of running the scheme.

And, although it may seem there is limited scope in pensions administration to address environmental concerns, the truth is that all financial service providers and trustees can make improvements that will promote awareness and benefit the environment.

An environmental policy should be the foundation from which schemes can start thinking about how they address the common environmental problems in the industry.

End the paper culture

Reducing paper waste is one target all pension schemes can easily embrace. This might seem obvious, but the overuse of paper in the pensions industry is a problem that shows no sign of abating.

All pension schemes can take steps to promote a reduction in paper usage both in terms of member communications and trustee board meetings.

More strongly promoting web and paperless options as well as sharing the facts about paper can be hugely powerful in getting scheme members on board. Did you know, for example, that it takes an average of five litres of water to produce one piece of A4 paper?

Ending the default paper culture that has built up around pensions is critical. Introducing strategies and measurable targets for pension schemes to promote and build digital adoption could significantly reduce paper production and its associated waste.

Regular travel is a fundamental requirement for trustees and their advisers. However, the ways in which we travel can have vastly different effects on the environment. Pension schemes can reduce their carbon footprint (and save on travel budgets at the same time) by encouraging advisers to appear at meetings through video conferencing.

Those in glass houses...

Pension schemes have quite rightly started to focus on social and corporate governance matters when it comes to their investments. However, there is still plenty of work to be done when it comes to reducing the operational carbon footprint of pension schemes.

Small steps taken by individual schemes might not seem as though they will have much of an impact, but without those small steps, we could soon find ourselves blindly following a dangerous path towards extreme global warming.

Trustees and administrators, therefore, need to think carefully about how the operational elements of their service impact the environment, and what they can do to reduce climate change.

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