The timing of the ESG disclosure regulations with the implementation statements coming into effect on 1 October, combined with a greater awareness from consumers around climate change, is creating a unique opportunity for schemes to really engage with their membership on environmental, social and governance issues. 

What the pandemic has done is boosted awareness of sustainable practises. The promise of another lockdown is at least softened by the thought of a return to fewer planes racing across the sky, less traffic and cleaner air, if only (hopefully) for a few short weeks.

These sentiments are hardly new. But they’re not always at the forefront of an investor’s mind; in particular, where investments are made on behalf of consumers, as is the case in pension schemes. 

Pension scheme members are often forgotten consumers. They’re treated as the perfect Homo Economicus who are not subject to the normal whims and wants of the average human being. Judging by the way we communicate to them, we assume that a scheme member is someone that just needs all the information possible given to them, and then they will automatically make all the right decisions. The fact is though, rather than Homo Economicus, we are all often a bit more Homer Simpson.

So what do we mean when we say Homo Economicus (introduced by John Stuart Mills)? An economic human is rational. They make sure they have all the information to hand before making a decision, they apply the laws of probabilities correctly and have infinite capacity to make rational decisions.

Whereas Homer Simpson is possibly a bit more like you and me. We use mental shortcuts to make decisions in life. We get overwhelmed by choice, we often stick to the status quo because we don’t know what else to do, or we’re too afraid to take the risk (rather the devil you know). Often, losing something hurts twice as much as the pleasure of gaining something of equal value (another reason why the default has such a strong hold on us).

These biases are applied in a systematic way and is the subject of a great deal of study. What is important to this discussion though is what that means for schemes and Trustees and the way they communicate to their members. 

One of the original heuristics is “availability”. How quickly an example of something would come to mind. Often also described as salience. One thing the pandemic has definitely highlighted is our dependence on the natural environment.

“Generation Investment Management (GIM), says the pandemic has boosted awareness of the urgent need for a decisive shift to sustainability. The economic and social hiatus caused by the outbreak provides a once-in-a-generation opportunity to reevaluate how we live, work, and what we want or need to consume, the report states. It could be a powerful catalyst for a more sustainable future.”.

So how will we keep up this momentum:

  • Salience: keep it at the forefront of people’s minds, like Scottish Widows do
  • Ease: make sure people can access information about the ESG credential of their investments
  • Use relatable messengers and social norms: The number of well known people who are outspoken about climate change in particular is growing with a reach across generations; Gretha Thunberg to David Attenborough.

Know your audience – different generations prioritise different aspects of ESG. This report from L&G provides a detailed study in the differences between the generations and also, genders. You can also watch our discussion and how technology can assist in member engagement here.