The report, Reclaiming Ownership, covers nine pension providers with £1.9trillion in assets under management. This is a sizeable proportion of the £3trillion life insurance companies and pension funds market in the UK.
The providers’ default auto-enrolment funds were ranked on transparency, governance and Responsible Investment performance. Out of a possible total score of 80, the providers rank as follows: Aviva (39); Standard Life (contract-based scheme) (37); Standard Life (master-trust) (36); Aegon (32); NEST (27); Legal & General (master-trust) (23); Legal & General (contract-based schemes) (23); NOW: Pensions (17); Royal London (16); Scottish Widows (13); The People’s Pension.
Under automatic enrolment, employers must enrol staff earning more than £10,000 a year into a pension scheme. In 2016 alone, half a million small employers must select a provider for their staff. It is estimated that by 2018, the number of UK pension savers in an auto-enrolment scheme will have grown by 9 million.
The providers surveyed for this research are set to dominate the UK’s private pensions market for decades to come. The ShareAction survey found that:
- Not a single auto-enrolment pension provider in the group has chosen to put a pension saver with assets in the scheme on its board. Historically UK pension schemes have had at least one third of their boards made up of Member Nominated Trustees whose own retirement savings are in the scheme concerned. In the context of significant problems over the last decade with conflicts of interest, poor service and value for money in the contract-based side of the UK’s pensions market the lack of pension savers with ‘skin in the game’ on the boards of the UK’s major auto-enrolment providers is troubling.
- A number of these giant providers are delegating virtually all responsibility for the prudent stewardship of pension savings to asset managers, rather than developing and communicating their own investment policies to protect members’ savings. Most of the schemes do not disclose investment policies to customers on their customer-facing websites. This makes it unclear how, or indeed if, these pension providers scrutinise their asset managers and hold them to account on behalf of savers.
- The problem of weak oversight is particularly severe when the asset managers are third parties and not part of the same firm as the provider. Only five of the providers require evidence of stewardship capabilities when selecting external asset managers. Only two of the providers surveyed, NEST and Aviva, have issued statements of compliance with the UK Stewardship Code as asset owners.
- NEST, the government-backed auto-enrolment provider, got the best score on governance. NEST is to be commended for having a section on Responsible Investment on its customer facing website. NEST and NOW: Pensions both have a member panel with more formal roles in the governance structure, although neither has a member on its board. Aegon, Standard Life and Aviva have established customer hubs or customer research communities. While the research finds some emerging best practice, overall the report concludes that communications and accountability to members “still fall way short of what is needed to overcome the public’s widespread lack of trust and understanding of the pension sector.”
- There is a wide variation on how the schemes are integrating social, environmental and governance risks into their investment strategies. Under auto-enrolment, savers bear all the risks if investments perform badly – even though the employer decides which scheme to enrol with. The criteria on which employers select a pension provider tend to focus on the cost to them and the ease of setting up a scheme. Important as these are to employers, they make no difference to the savers’ long-term outcomes. The research identifies a serious risk that members’ best interests will not be the determining factor by which pension providers succeed in winning market share over the next crucial years of the auto-enrolment journey.
In 2014, the Pensions and Lifetime Savings association (PLSA, then the NAPF) released data showing that 70% of UK adults “felt it important for pension providers to invest in companies that concentrate on avoiding unethical practices” and 49% would like their employer “to choose a provider which makes a specific point of investing ethically.”
ShareAction’s research examined the providers’ policies on a range of responsible and ethical investment topics known to be of interest to UK pension savers: executive pay, corporate tax transparency, climate change risk, investments in companies manufacturing controversial weapons, and human rights. It found that:
- Aegon is the only company to have a clearly disclosed policy of avoiding companies that manufacture weapons banned under the Inhumane Weapons Convention, such as cluster munitions. Aegon’s parent company is in the Netherlands where it is illegal for pension funds to invest in such firms. In the UK there is no such law, and there is no guarantee that funds are not invested in the manufacture of these controversial weapons. Four of the providers surveyed (Legal & General, Royal London, NEST and The People’s Pension) do not provide any public information on how they invest in arms in their default funds.
- Only four providers (Aviva, NEST, Standard Life and Legal & General) describe the need for companies’ remuneration policies to be linked to the long-term financial success of the company. None of the providers’ policies expect companies to provide their shareholders with comprehensive reporting on tax policy and taxes paid in different jurisdictions. Since 2008, corporate tax avoidance and executive remuneration have consistently been ranked as the top two issues that concern the public with regard to corporate behaviour.
- On climate change, Aviva got the highest score. Only Aviva, Aegon and Legal & General state that they invest in companies or projects that support the transition to a low-carbon economy and emissions reduction in the economy as a whole, a finding described as “concerning”.
Many of the providers do little or nothing to find out which investment issues their pension savers care most about. Only Standard Life surveys members of its default auto-enrolment fund on their views on investments. None of the providers give information in their annual statements to members about what they are doing to invest their savings responsibly with regard to environmental and social issues.
Catherine Howarth, Chief Executive at ShareAction, said: “At a time when thousands of employers in the UK are figuring out what pension provider to select for their workforce, we’re pleased to release information that will help employers make a choice that is guided by the long-term needs and interests of their staff. We’ve looked under the bonnet at the investment policies of the UK’s dominant players in auto-enrolment and found a serious gulf in performance between the best and worst when it comes to managing conflicts of interest, good governance and responsible stewardship of assets. These factors will make a huge difference to UK pension savers over the long-term.”
Camilla de Ste Croix, Senior Policy Officer at ShareAction and one of the report’s authors, said:
“We’re proud to have produced the first independent benchmarking survey of auto-enrolment pension providers, particularly as it’s not always easy to find out how and where pension savers’ money is invested. Although we found much room for improvement across the board, we also found that there is plenty of best practice that pension providers can draw on if they want to know how to improve. Whether looking at their peers at home in the UK, or oversees, particularly to the Netherlands, joining collaborative investor initiatives or making use of the many emerging international norms and standards its easier than ever for pension providers to invest more responsibly.”
Daniel Godfrey, former Chief Executive of the Investment Association, said: “Nobody has longer-term savings objectives than members of auto-enrolment pension savings arrangements. ShareAction’s report should encourage all investment managers to support companies that have long-term strategies. Real long term thinking requires serious approaches to human capital development, research and investment. It also means supporting – and if necessary, requiring – companies to look after the environment, pay their fair share of taxes, lobby governments with integrity, andaddress pay inequality and diversity. ShareAction is reinforcing the importance of long-term investment approaches to pension scheme members, to companies and to the economy.”
Jill Rutter, a Scottish Widows pension customer, said: “This research from ShareAction will help employers make more informed choices about which pension provider to use, and is a valuable resource for savers too. It’s really hard to find information about where your pension savings actually go, and not enough providers are taking the time to actually find out what their customers think. I am concerned about climate change and don’t want my savings to be invested in companies with high-carbon business models. Having this information publicly available puts pressure on all pension providers to take a more responsible approach to their investment practices.”
7 New Technologies That Could Radically Change Our Energy Consumption
Most of our focus on technological development to lessen our environmental impact has been focused on cleaner, more efficient methods of generating electricity. The cost of solar energy production, for example, is slated to fall more than 75 percent between 2010 and 2020.
This is a massive step forward, and it’s good that engineers and researchers are working for even more advancements in this area. But what about technologies that reduce the amount of energy we demand in the first place?
Though it doesn’t get as much attention in the press, we’re making tremendous progress in this area, too.
New Technologies to Watch
These are some of the top emerging technologies that have the power to reduce our energy demands:
- Self-driving cars. Self-driving cars are still in development, but they’re already being hailed as potential ways to eliminate a number of problems on the road, including the epidemic of distracted driving ironically driven by other new technologies. However, even autonomous vehicle proponents often miss the tremendous energy savings that self-driving cars could have on the world. With a fleet of autonomous vehicles at our beck and call, consumers will spend less time driving themselves and more time carpooling, dramatically reducing overall fuel consumption once it’s fully adopted.
- Magnetocaloric tech. The magnetocaloric effect isn’t exactly new—it was actually discovered in 1881—but it’s only recently being studied and applied to commercial appliances. Essentially, this technology relies on changing magnetic fields to produce a cooling effect, which could be used in refrigerators and air conditioners to significantly reduce the amount of electricity required.
- New types of insulation. Insulation is the best asset we have to keep our homes thermoregulated; they keep cold or warm air in (depending on the season) and keep warm or cold air out (again, depending on the season). New insulation technology has the power to improve this efficiency many times over, decreasing our need for heating and cooling entirely. For example, some new automated sealing technologies can seal gaps between 0.5 inches wide and the width of a human hair.
- Better lights. Fluorescent bulbs were a dramatic improvement over incandescent bulbs, and LEDs were a dramatic improvement over fluorescent bulbs—but the improvements may not end there. Scientists are currently researching even better types of light bulbs, and more efficient applications of LEDs while they’re at it.
- Better heat pumps. Heat pumps are built to transfer heat from one location to another, and can be used to efficiently manage temperatures—keeping homes warm while requiring less energy expenditure. For example, some heat pumps are built for residential heating and cooling, while others are being used to make more efficient appliances, like dryers.
- The internet of things. The internet of things and “smart” devices is another development that can significantly reduce our energy demands. For example, “smart” windows may be able to respond dynamically to changing light conditions to heat or cool the house more efficiently, and “smart” refrigerators may be able to respond dynamically to new conditions. There are several reasons for this improvement. First, smart devices automate things, so it’s easier to control your energy consumption. Second, they track your consumption patterns, so it’s easier to conceptualize your impact. Third, they’re often designed with efficiency in mind from the beginning, reducing energy demands, even without the high-tech interfaces.
- Machine learning. Machine learning and artificial intelligence (AI) technologies have the power to improve almost every other item on this list. By studying consumer patterns and recommending new strategies, or automatically controlling certain features, machine learning algorithms have the power to fundamentally change how we use energy in our homes and businesses.
Making the Investment
All technologies need time, money, and consumer acceptance to be developed. Fortunately, a growing number of consumers are becoming enthusiastic about finding new ways to reduce their energy consumption and overall environmental impact. As long as we keep making the investment, our tools to create cleaner energy and demand less energy in the first place should have a massive positive effect on our environment—and even our daily lives.
Two Ancient Japanese Philosophies Are the Future of Eco-Living
Our obsession with all things new has blighted the planet. We have a waste crisis, particularly when it comes to plastic. US scientists have calculated the total amount of plastic ever made – 8.3 billion tons! Unfortunately, only 9% of this is estimated to have been recycled. And current global trends point to there being 12 billion tons of plastic waste by 2050.
However, two ancient Japanese philosophies are providing an antidote to the excesses of modern life. By emphasizing the elimination of waste and the acceptance of the old and imperfect, the concepts of Mottainai and Wabi-Sabi have positively influenced Japanese life for centuries.
They are now making their way into the consciousness of the Western mainstream, with an increasing influence in the UK and US. By encouraging us to be frugal with our possessions, (i.e. using natural materials for interior design) these concepts can be the future of eco-living.
What is Wabi-Sabi and Mottainai??
Wabi-Sabi emphasizes an acceptance of transience and imperfection. Although Wabi had the original meaning of sad and lonely, it has come to describe those that are simple, unmaterialistic and at one with nature. The term Sabi is defined as the “the bloom of time”, and has evolved into a new meaning: taking pleasure and seeing beauty in things that are old and faded.
Any flaws in objects, like cracks or marks, are cherished because they illustrate the passage of time. Wear and tear is seen as a representation of their loving use. This makes it intrinsically linked to Wabi, due to its emphasis on simplicity and rejection of materialism.
In the West, Wabi-Sabi has infiltrated many elements of daily life, from cuisine to interior design. Specialist Japanese homeware companies, like Sansho, source handmade products that embody the Wabi-Sabi philosophy. Their products, largely made from natural materials, are handcrafted by traditional Japanese artisans – meaning no two pieces are the same and no two pieces are “perfect” in size or shape.
Mottainai is a term expressing a feeling of regret concerning waste, translating roughly in English to either “what a waste!” or “Don’t waste!”. The philosophy emphasizes the intrinsic value of a resource or object, and is linked to hinto animism, the notion that all objects have a spirit, or ‘kami’. The idea that we are part of nature is a key part of Japanese psychology.
Mottainai also has origins in Buddhist philosophy. The Buddhist monastic tradition emphasizes a life of frugality, to allow us to concentrate on attaining enlightenment. It is from this move towards frugality that a link to Mottainai as a concept of waste can be made.
How have Wabi-Sabi and Mottainai promoted eco living?
Wabi-Sabi is still a prominent feature of Japanese life today, and has remained instrumental in the way people design their homes. The ideas of imperfection and frugality are hugely influential.
For example, instead of buying a brand-new kitchen table, many Japanese people instead retain a table that has been passed through the generations. Although its long use can be seen by various marks and scratches, Wabi-Sabi has taught people that they should value it because of its imperfect nature. Those scratches and marks are a story and signify the passage of time. This is a far cry from what we typically associate with the Western World.
Like Wabi Sabi, Mottainai is manifested throughout Japanese life, creating a great respect for Japanese resources. This has had a major impact on home design. For example, the Japanese prefer natural materials in their homes, such as using soil and dried grass as thermal insulation.
Their influence in the UK
The UK appears to be increasingly influenced by thes two concepts. Some new reports indicate that Wabi Sabi has been labelled as ‘the trend of 2018’. For example, Japanese ofuro baths inspired the project that won the New London Architecture’s 2017 Don’t Move, Improve award. Ofuro baths are smaller than typical baths, use less water, and are usually made out of natural materials, like hinoki wood.
Many other UK properties have also been influenced by these philosophies, such as natural Kebony wood being applied to the external cladding of a Victorian property in Hampstead; or a house in Lancaster Gate using rice paper partitions as sub-dividers. These examples embody the spirit of both philosophies. They are representative of Mottainai because of their use of natural resources to discourage waste. And they’re reflective of Wabi-Sabi because they accept imperfect materials that have not been engineered or modified.
In a world that is plagued by mass over-consumption and an incessant need for novelty, the ancient concepts of Mottainai and Wabi-Sabi provide a blueprint for living a more sustainable life. They help us to reduce consumption and put less of a strain on the planet. This refreshing mindset can help us transform the way we go about our day to day lives.
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