Most of us recycle our plastics and care about fair working conditions, so why shouldn’t we have the same standards for the companies we invest in? Thanks to the rise of ESG funds, more people are investing their money in a socially responsible way, taking into account environmental, social and governance factors. Here’s what ESG investing is and why it might be for you – aligning your investments to your values and helping to build a better world.


What is ESG investing?

ESG stands for environmental, social and governance, and ESG investing lets you get exposure to the stock market while following socially responsible principles. Do you care about whether companies pay workers a fair wage, or how diverse a company and its board of directors are? Do you want to know that a company’s supply chain is responsibly managed, and that it’s taking steps to reduce its environmental impact? 🌍 Well, ESG investing lets you champion these factors and more – ensuring that your investment strategy is benefitting more than just your bottom line.


Why is ESG investing becoming so popular?

ESG investing has been gaining in popularity – especially since environmental awareness, social justice and fair treatment for workers have become increasingly important to a larger number of investors.

Because of this, companies have had to increase their focus on ESG factors to remain competitive, especially with certain demographics like millennial investors. 🤗 People think it’s important that companies have a larger focus on ESG – and an interesting fact grabbed headlines a few years ago when the Carbon Majors report showed that just 100 companies were responsible for around 70% of global emissions.


Best ESG funds and companies

To find the best ESG funds and companies, you’ll need to use a search tool like the one offered by MSCI. 🛠️ It ranks thousands of global funds and companies using ratings from CCC (for funds and companies that are lagging behind their competitors) to AAA (if they are leading the way in their industry for ESG).

It’s a useful tool if you want the full details on just how closely the funds and companies you want to invest in champion ESG values. Not only is this good if you’re an investor, it’s also good information to get familiar with for your pension. 👴


How can your pension affect ESG?

The money you contribute to your pension is invested, usually across multiple industries and companies, all of which could be producing harmful carbon emissions. As a result, the average person’s pension has a carbon footprint of 26 tonnes – that’s more than three times the amount of greenhouse gases the average person in the UK generates in a year!* 🤯 

One of the easiest and most impactful ways you can reduce your carbon footprint is to invest your pension in a socially responsible fund. With £2.6 trillion invested in UK pensions, there’s power in your pension.** Due to their size, pension funds end up having a large stake in the economy and can use their power as major shareholders to make sure companies are operating in a socially responsible way. And by moving a pension pot of £30,000 from a traditional fund to a more sustainable investing option, you could save up to 19 tonnes of carbon per year.***

In the UK, the tide is turning against traditional investments in favour of ESG opportunities – including pension investments. 📊 In 2020, the Financial Times reported that PwC surveyed 300 representatives from pension funds and insurance companies, and 75% said they would stop buying conventional funds in favour of ESG products by 2022.

Maybe the most important factor in ESG is the environmental factor. Findings from the Intergovernmental Panel on Climate Change (IPCC) have shown that the world is likely to reach 1.5C of warming in the next 20 years – with some aspects of climate change, like rising sea levels, already being irreversible. 🌡️

This is where the power of your pension could come into play. Investing pension pots into global funds or companies that promote ESG values means there’s far more weight behind attempts to prevent the worst effects of climate change in the coming years. 🏋️

If you’ve lost track of your old workplace pension pots and how they’re invested, we can help you find and combine them into a single, easy-to-access Moneybox Personal Pension. Plus, we have two ESG funds you could invest your pension into.


Learn more about the Moneybox Pension


How are ESG ratings calculated?

To give you an idea of how ESG ratings are calculated, we’re going to look at how MSCI produces their World ESG Index. 

First, MSCI eliminates companies that are involved in very serious controversies involving the environmental, social, or governance impact of their operations, products and services. These companies won’t be included. 

This is known as the ‘controversy score’, and it’s ranked on a scale of 0 to 10, with 0 being the most severe controversy. MSCI also excludes companies that are involved in controversial business activities including alcohol, gambling, tobacco, nuclear power, conventional weapons and nuclear weapons.

Next, MSCI assesses and scores the remaining companies within its World ESG Index based on their ESG risks and opportunities relative to their industry peers. The three pillars of environmental, social and governance can be broken down into 10 themes, including climate change, natural resources, human capital, product liability, corporate governance and corporate behaviour. 

The assessment factors include criteria such as how companies respond to climate change, treat their workers and manage their supply chains. Company scores are adjusted for each industry and then mapped to a letter rating, ranging from ‘AAA’ to ‘CCC’.

Finally, the companies are ranked on their ESG rating, and the top 50% of companies (based on market capitalisation) in each industry and geographical region are selected for the MSCI World ESG Index. 

Our Old Mutual MSCI World ESG Index fund – labelled as Global Shares ESG in-app – tracks the MSCI World ESG Index, and it’s not the only ESG or socially responsible fund that we offer. Check out our full range today to see the other ESG investing opportunities we offer.


Explore fund range


How to invest in ESG with Moneybox

With Moneybox, you’ll be able to get exposure to socially responsible companies through our two ESG tracker funds.

  • Old Mutual MSCI World ESG Index: get exposure to companies from across the developed global stock market who emphasise ESG factors in their day-to-day operations.
  • Royal London Emerging Markets ESG Leaders: track the performance of companies from emerging markets that are championing ESG values.

Just so you know, you’ll see that we offer ‘SR’ (Socially Responsible) Starting Options, and these include the Old Mutual MSCI World ESG Index mentioned above. To bring the Royal London Emerging Markets ESG Leaders fund into your portfolio, go to Settings > Allocations in-app. Learn more about our fund range.

As with our Personal Pension, you can invest in these ESG funds through our Stocks & Shares ISA. With an ISA you won’t pay any tax on your investment gains and you can invest up to £20,000 each tax year plus, you’ll get exclusive access to our range of ETFs – many of which come with an ESG tag!

If you reach your £20,000 ISA limit, we also have a General Investment Account (GIA), although you won’t enjoy the same tax breaks as a Stocks & Shares ISA.



* Aviva. Understanding the power of your pension: Pension fund carbon savings research 2021

** ONS, Pensions in the National Accounts, 2021

*** Aviva, 2021