DC pension saving: the next ethical consumer boom?

The UK’s inaugural National Ethical Investment Week (NEIW) runs from 18th-24th May. Why is this of interest to pensions professionals? The simple answer is ‘defined contribution’.
Highlighting the green and ethical investment options available in many defined contribution funds could be an effective way to encourage greater support for the fund, raising awareness of those options and encouraging greater general engagement with pension provision. Where the employer is a corporate social responsibility leader, it could also create a virtuous circle between the pension fund and the values and practices of the business – highlighting the links between wealth creation and responsible business behaviour in a way that both reinforces employee commitment and motivation and interest in saving for retirement.
This may sound surprising to those who still see green and ethical investment as a niche issue – something of interest only to a sandal-wearing minority. Indeed even the doughty champions of long-term responsibleinvestment and extra-financial research may raise their eyebrows at the idea that green and ethical consumerism has an important role to play in influencing future pension demand.
But go into almost any supermarket near you and think again! Green is cool, ethical is aspirational and there is an emerging case that we will see a fundamental shift in consumer behaviour play out over the next few years – although with some interesting twists that could be discomforting to traditional green campaigners.
Look at the rise of Fairtrade in recent years. The British public now drinks over 8 million Fairtrade hot drinks every day, according to the Fairtrade Foundation. One in four bananas sold by UK supermarkets is now Fairtrade. There are over 3,000 products licenced to use the Fairtrade label, up from three in 1994 and only 350 as recently as 2004 . And, most importantly, nine out of ten people in the UK have heard of Fairtrade.
Contrast that with only a few years ago and see how ethical consumerism can engage the public.
This is part of a wider social trend in which ethical consumption and responsible behaviour has moved from a minority concern into the mainstream. In doing so, it is appealing to a greater diversity of people. Pensions professionals may well wish to consider the emerging body of research on sustainable consumption. An increasingly effective social marketing research community is advising companies and government on how to encourage all consumers to change their behaviour to address climate change, biodiversity loss and the other impacts of the current western lifestyle. The recognition of climate change has clearly been a wake-up call for many people. But the evidence is building that there is more to it than that. A couple of years ago, Campaign Strategy newsletter – one of the more thoughtful and inspiring publications commenting on this trend – flagged up that the Henley Centre had identified that desire for material things was being replaced by a desire for belonging, community and experiences. With over 60% of the UK public in 2004 agreeing with the statement ’I have got all the material things I need’, this clearly went beyond the traditional ethically concerned and inner directed – the marketing segment often known as ‘pioneers’. More recently, Campaign Strategy has quoted evidence from Cultural Dynamics Strategy and Marketing (CDSM) to highlight that we may have reached a tipping point in green and ethical behaviour. Tracking change in the UK population since the 1970s, CDSM has found a steady increase in personal growth/ethical ‘pioneers’ and shrinkage in the security-minded ‘settlers’ segment – so that pioneershave recently become the majority group at over 40%, compared with around 20% settlers and just under 40% in the third and final segment – the outer-directed esteem-driven ‘prospectors’.
Why does this create a tipping point? Because the outer-directed prospectors (who want, for example, to ‘keep up with the Jones’s’) are now looking to pioneers for their standards of behaviour to copy rather than to settlers – meaning that desire for security and physical symbols of success is being replaced instead by ethical behaviours becoming increasingly fashionable.But the twist is that these ethical behaviours are motivated by prospector values like ‘being fashionable’ not by inner-directed pioneer values. The challenge for both green and ethical investment marketing and pensions professionals is to shift their communications to respect and work with this.
National Ethical Investment Week is exploring how to learn from the success of initiatives like Fairtrade Fortnight. It is reaching out beyond the inner-directed pioneers to people who want to ‘do their bit’, ‘look good to the kids’ and ‘protect the world for their own future as well as for other people’.
NEIW’s core message is that choosing a green and ethical investment is another way of acting more responsibly – a positive choice that means your money not only works hard for you, but can also help society and the environment. It’s not too late to get involved. Posters can be downloaded from the National Ethical Investment Week web site or requested online for immediate dispatch.
Visit www.neiw.org to find out more.