“Pension participants primarily value financial returns, but they also value sustainability outcomes. Most prefer investments that actively support positive social and environmental impact.”

 

What is the focus of the paper?

This study investigates how pension participants’ sustainability and financial goals shape their preferences for pension fund investment strategies. Drawing on Goal Theory and Regulatory Focus Theory, it examines trade-offs between sustainability and financial returns, sensitivity to changes in pension income, and preferences for inclusion-based versus exclusion-based sustainable investment strategies. The research uses a large-scale choice-based conjoint experiment among 2,062 pension participants combined with survey measures of personal goals and preferences. The study focuses on collective pension schemes in which participants do not directly choose investment strategies themselves.

 

What are the key findings?

Most participants consider financial goals more important than sustainability goals, although a substantial group prioritizes sustainability. Participants with stronger sustainability goals are more willing to accept lower pension income in exchange for greater social or environmental impact. On average, participants prefer inclusion strategies that allocate more capital to high-performing sustainable companies rather than exclusion strategies that avoid poorly performing companies. Social and environmental sustainability are valued roughly equally overall. Most participants have a promotion-focused sustainability orientation and therefore prefer inclusion strategies, while prevention-focused participants show relatively greater support for exclusion strategies.

 

What are the implications?

  • Pension funds can increase participant support by aligning investment strategies more closely with diverse sustainability and financial preferences.
  • Inclusion strategies best match participant preferences, but combining inclusion and exclusion approaches will appeal to both promotion- and prevention-focused participants.
  • Clear communication about sustainability and financial trade-offs can strengthen engagement, satisfaction, and understanding among participants.
  • Both social and environmental dimensions deserve attention because participants differ in the priorities they assign to them.