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Pension beneficiaries prepared to sacrifice returns in favour of responsible investing

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Forty percent of pension participants are willing to forfeit part of their retirement income if the fund’s investment strategy matches their view on responsible investment, a survey has suggested.

A beneficiary’s preparedness to sacrifice pension rights is directly linked with the intensity of personal preference for socially responsible investment (SRI), according to researchers Rachel Pownall and Arian Borgers of TIAS Business School, part of Tilburg University in the Netherlands.

They found that the willingness to see benefits reduced is strongest among more highly educated and highly paid participants, and that male participants were significantly less prepared to do so.

The researchers also found that people who drink at least one glass of alcohol every week are also less prepared to trade their benefits for SRI.

The survey revealed that participants’ biggest aversion is against the arms manufacturing industry as well as against companies involved in the violation of human rights.

However, investments in tobacco and alcohol were less disputed, in particular among people who drink and smoke.

Pownall and Borgers concluded that their results undermine the general assumption that maximum returns are pension funds’ most important goal.

Such a debate has been occurring in the UK following the publication of a report on fiduciary duties of pension trustees, and if these duties require them to invest for the highest return at all times.

Pownall commented: “We notice that people increasing prefer socially responsible products, even if these are often more expensive.

She suggested that the outcome is in line with the principle that people are willing to pay more for a better product, and that a turning point had been reached following mounting social involvement.

In her opinion, the research shows that pension funds should increasingly take personal values and wishes into account in their investment policy.

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