Disclaimer: Views in this blog do not promote, and are not directly connected to any Legal & General Investment Management (LGIM) product or service. Views are from a range of LGIM investment professionals and do not necessarily reflect the views of LGIM. For investment professionals only.

Climate strike two – and we’re out (of the office)!

What I’ve learned from attending the climate protests in London.

On an unusually warm day in late September – which some among us might suspect had something to do with a changing climate – I made my way from the City to Westminster.

If anyone from HR asked, I was attending a ‘multi-stakeholder forum to discuss future evolutions of climate policy’. More concisely, I went to the climate protests.

As swarms of people converged on Parliament Square and Millbank, I set out to try to find out how the protesters thought about the climate emergency, and the role of individuals, governments, and the financial sector in dealing with these challenges.

People are more engaged than ever – but not with their investments

It’s not just temperatures at record highs – so is public concern. A recent poll found 71% of Britons thought climate change is a more pressing long-term issue than even Brexit.

The wide diversity of the participants gathered outside Parliament reflected this: among the estimated 100,000 protesters, I met an array of people from retirees and schoolchildren, private-sector entrepreneurs to public-sector union members.

Many of those I spoke to had been thinking about their personal actions. Decisions on what to eat, how to travel, and even whether to have children were made with one eye on carbon budgets, not just household budgets. Some had gone further, asking their employers to act – getting more clean power for the London Underground, for example.

Few, though, had given as much thought to their role as investors in helping to accelerate the low-carbon transition. I spoke to a renewable energy engineer, who admitted she had never considered the possibility that her own pension might be propping up the coal plants that in her day job she was trying to render obsolete. The same coal plants causing thousands of premature deaths from air pollution in the UK – which a doctor I spoke to had devoted his life to preventing, even if he too had not thought much about the potential impact of his own pension portfolio.

There were some exceptions. Another engineer had attempted to change his pension to a more environmentally friendly option, but had eventually given up because the process wasn’t user friendly.

Only a few had actually made a switch. An elderly retiree told me she was no longer content with her decision to own a fund which just excluded controversial industries; she wanted to be part of the solution and was now investing in ‘impact funds’ which explicitly target positive societal benefits. Was this hard to do?, I asked. No, her financial adviser had faced many similar questions and had an option readily available.

A climate ‘hook’

That many do not really know what their pensions are invested in – or find switching funds difficult – is not news. But what is noteworthy is that in an ocean of apathy, there are some atolls of volcanic debate.

Campaigns calling for divestment from fossil fuels by universities, public bodies, and corporate pension plans around the world are one such example.

Whether divestment is environmentally effective or financially prudent is the subject of heated debate, but it’s the existence of the debate in the first place that matters. It points to a ‘hook’ that can be used to engage savers with their money.

As this video illustrates well, once people realise they are investors, they start to care what they do or don’t invest in. In fact, research by LGIM found savers would be willing to pay more into their pension if they knew more about how their investments are having a positive (or at least less negative) impact.

A cynic might dismiss the frequent calls for ‘system change, not climate change’ on the placards as empty virtue signalling, since everyone’s responsibility may well be no-one’s responsibility. But even virtue signalling needs due diligence.

With social media now enabling real-time conspicuous consumption, the growing desire to be seen as making the sustainable (investment) choice should not be discounted on the grounds of insufficient ideological purity.

Some consumers facing peer (or time) pressure will just be looking for an easy option for their pension or ISA. Others might ask sophisticated questions about stranded assets and peak oil demand.

A low-risk strategy for the finance industry would be to develop an approach to climate change robust enough to meet the expectations of both. A good bottle of Dom Perignon can satisfy both the collector who knows all about grape varieties and someone just out to impress their friends with their choice of wine.

In the second part of this blog, next week I will address what these protests mean for us as investors.