A growing number of people are considering ESG (environmental, social, and governance) factors when making investment decisions. However, one area you might overlook is your pension.
ESG investing is about considering factors besides financial ones when making investment decisions. These factors are grouped into three broad categories – environmental, social and governance – and aim to align your investments with your values.
For example, when you go grocery shopping, you might choose Fairtrade products because you want to support companies that pay workers a living wage. When making investment decisions, you might apply these same values by investing in companies that treat workers across their supply chains fairly.
That’s not to say that the financial factors you usually consider when investing are no longer important. ESG investing aims to deliver both financial returns and a positive impact.
Whether you’re considering ESG factors or not, keep in mind that investment values may fall and you may not get back the full amount you invested.
If you’ve already applied ESG factors to some of your investment decisions, you might want to do the same to your pension. If you’re thinking about ESG investing for the first time, a pension could be a good place to start. Here’s why.
1. Your pension is often one of your largest assets
For many people, their pension is one of the largest assets they own. Indeed, according to Standard Life (21 August 2025), the average person between the ages of 65 and 74 has pension wealth of more than £145,000.
So, if you want your investments to have a positive impact and overlook your pension, you could be missing out on a significant opportunity.
In addition, you cannot usually access your pension until you turn 55 (rising to 57 in 2028), and your contributions are invested for several decades. As a result, you might benefit from the compounding effect, both in terms of financial returns and the positive impact your ESG decisions could have.
2. A strong ESG focus could lead to more resilient businesses
It’s a common misconception that incorporating ESG factors into your investment decisions means accepting lower returns. While investment returns cannot be guaranteed, evidence suggests this isn’t the case.
In fact, some investors argue that businesses with a strong ESG record are focused on long-term wealth creation and are less exposed to risks that could lead to volatility.
Research from Durham University (25 March 2026) supports this view. Researchers analysed data from tourism companies across 26 countries between 2002 and 2018. They tracked each firm’s survival status compared to its ESG performance and found companies with a higher ESG score had a 12.4% lower probability of failure. In addition, ESG-focused companies experienced a 1.22% lower risk of volatile earnings.
It’s important to note that this study focuses on one sector and a relatively small number of businesses. Investment returns and future volatility cannot be accurately predicted. Past performance is not a reliable indicator of future performance. All investments carry risk. The value of your investment (and any income from them) can go down as well as up and you may not get back the full amount you invested.
3. Pension providers often offer an ESG fund
Finally, incorporating ESG values into your pension decisions is often simple.
Typically, your pension will be invested in a fund, which will pool your money with that of other investors to invest in a range of assets.
Pension providers will usually offer a range of funds you can choose to invest in. These might have different aims and risk profiles, and many providers now offer funds with an ESG focus. This allows you to select a fund that suits your needs and values.
You can often change which fund your pension is invested in online in just a few minutes.
Remember, a fund that aligns with your ESG values isn’t automatically the right one for you. You should also consider the risk profile of the fund and whether it’s appropriate for your goals and financial circumstances.
Contact us
We’re here to help answer your ESG investing questions, including those about your pension. Please contact us to talk to one of our team.
Please note:
This article is for general information only and does not constitute advice. The information is aimed at individuals only.
All information is correct at the time of writing and is subject to change in the future.
