Cushon’s new investment strategy: making people proud of their pensions

The Trustees of the Cushon Master Trust, the world’s first net zero pension, have unveiled their new investment strategy to further improve engagement levels and ultimately member outcomes. The new strategy which launches in early 2022 will reduce investment risk as the world moves towards a greener future.  

In an industry first for the defined contribution pensions market, the new portfolio of investments, through the use of listed bonds and equities and a multi asset private markets portfolio, delivers social impact that savers can feel proud of. It is currently the largest Master Trust allocation to private markets (15%) and the first in the DC sector to deliver impact across 100% of the portfolio.  

Cushon’s new strategy aims to increase the potential for greater investment returns by focusing on greener companies which are generally expected to perform better in the longer term. Cushon’s 200,000 members’ pensions will be invested in environmental projects such as the planting of new sustainable forests and in financing new wind and solar farms. It will reduce risk by improving diversification, ensuring members’ money is safeguarded against lower returns from ‘brown’ (carbon emitting) investments as the global economy transitions to net zero.  

To ensure strong returns for members the Trustees will, for the first time, include private market investments. These historically have not played a big part, if at all, in defined contribution pensions but they offer improved potential returns with markedly reduced investment risk as they allow for further diversification.   

The Trustees will work with Schroders Capital to manage investments in new high impact projects including private equity, forestry and new social housing. Lombard Odier Investment Managers will manage listed bonds focusing on the most promising companies that are accelerating towards net zero with the aim of supporting that transition. Wellington Management will manage listed social impact bonds, and listed equities will be managed by Macquarie Asset Management to a Cushon custom designed climate and social impact index created by Solactive. 

Roger Mattingly, Chair of the Cushon Master Trust said: “The changes announced to our investment strategy demonstrate our commitment to sustainability and responsible investment which we believe supports better long-term financial outcomes for our members. We have spent considerable time undertaking due diligence of the investments and fund managers, as well as negotiating costs to ensure that we can include private market investments well within the confines of the charge cap. We are certain the new investment strategy will deliver excellent retirement outcomes for our members.” 

Ben Pollard, Founder and CEO of Cushon said: “A good number of people will be able to name their pension provider, but a miniscule proportion will be able to name the underlying investments. This passive relationship has become the industry norm, but it’s one of the reasons there is apathy, particularly among younger savers. We need a new approach that places saver engagement at the heart of the pensions industry. That’s why a big focus of our new investment strategy includes, for the first time for the defined contributions market, connecting savers with investments in projects and companies that they can feel proud of and engage with. Our research shows that 62% of employees would engage more if they knew their pension was having a positive impact on climate change.” 

Cushon’s Strategic Adviser, Julius Pursaill, said: “Private markets increasingly offer sources of return that listed markets don't - forestry and micro finance for example, as well as private equity - these give members access to better diversification, higher expected returns and ultimately significantly improved investment outcomes. We will deliver regular updates to members about the positive change their pension savings are delivering for the planet and look forward to announcing novel ways our members will be able to engage with these investments in the coming months.” 

Above and beyond environmental projects, the new strategy seeks to ensure greater social impact for Cushon members’ investments, connecting savers with the UN’s Sustainable Development Goals (SDGs) and incorporating broader ESG (environmental, social and governance) principles. This might include investments in sustainable infrastructure projects in low- and middle-income countries to improve access to telecoms, education and medicine, and investment in advanced AgriTech innovation to support smallholder farmers in a changing world.  

When Cushon launched the world’s first Net Zero Now pension in January 2021, it used a mixture of environmentally friendly investments together with high-quality carbon offsets to ensure the fund was net zero. In less than a year, Cushon has gone even further to vastly reduce financed carbon emissions from the underlying investments from 80% of the UK average to below 50% and therefore reduce its reliance on carbon offsetting. Today’s announcement reflects Cushon’s commitment to year-on-year reductions of financed emission, with the ultimate goal of eliminating the need for carbon offsetting completely in the near future. 

Cushon will be announcing further details of each of the forward-thinking investment approaches for bonds, private markets and private equity in the coming weeks. For more details about Cushon’s Net Zero Now pension and its new investment strategy for members, visit cushon.co.uk.  

See more coverage here: Pensions Expert, Pensions & Investments, IPE, Pensions Age, Financial IT,  Professional Pensions, Corporate Adviser