A unique feature of Dutch pension funds, compared to other organizations with clients or customers, is that participants are “locked in”. While consumers are free to select or leave businesses that align with their values (e.g., businesses adopting sustainable practices), most pension participants cannot exit their pension provider due to disagreement with its sustainable investment policy. The immobility of participants and the likely heterogeneity in preferences for sustainable investments make this a unique and challenging communication problem: pension providers must communicate investment strategies in a way that resonates broadly. Typically, pension providers follow the preferences of the majority while fulfilling their fiduciary duties, which can leave some participants opposed to the sustainability direction chosen. The challenge, then, is how to communicate these strategies in a way that fosters understanding and trust among all (or at least most) participants while addressing the concerns of those who may disagree with the chosen approach.

This WorkPackage3 investigates how pension providers can effectively communicate their sustainable investment strategies and how these communications impact participants’ perceptions and responses. Specifically, it explores ways in which communication can foster trust, build support (‘draagvlak’), and enhance participants’ sense of control and empowerment, while also addressing concerns such as greenwashing, potential resistance, and the perceived costs of sustainable investments. This WP uses key insights stemming from WP1 (drivers of and barriers in sustainability decisions by individuals) and WP2 (eliciting pension participants’ sustainability preferences).

The concept of “Voice” in decision-making suggests that giving participants the opportunity to express preferences enhances acceptance of policies. For example, even if certain preferences (such as investing in sustainable initiatives) are not ultimately implemented, allowing people to voice their opinions and considering their perspectives can foster acceptance of the policy. However, while preferences are often elicited, a feedback loop communicating how preferences inform policy decisions is frequently absent. As a result, it is often unclear to pension participants if or how their preferences are taken into account, particularly when their preferences diverge from the average. Clear communication about the results of preference elicitation studies and how they influence policy decisions may therefore be essential to fully realize the benefits of the “Voice” concept. Moreover, communicating about the preferences of peers (i.e., others with the same pension provider) can enhance participants’ sense of empowerment and help them hold the pension provider accountable.

Communication is also indispensable in addressing misconceptions and simplifying the perceived complexity of sustainable investments. A common concern regarding sustainable investments is not only the potential for lower gross returns but also the belief that associated costs are significantly higher, which could further reduce net returns. As shown by Gneezy et al., people generally exhibit strong aversion to overhead costs. Addressing this concern through clear communication can help alleviate such misconceptions. Anderson and Robinson also find that even individuals with positive environmental behavior and strong green preferences may not invest sustainably due to the assumed complexity of such investments, suggesting that improved information provision could enable people to better express their sustainability values. Communications from pension providers should therefore be accessible, aiding participants in understanding and expressing their preferences and in comprehending the resultant investment policies.

Communication is also indispensable for addressing (mis)conceptions and simplifying the perceived complexity of sustainable investments. A common concern regarding sustainable investments is not just that it would yield lower gross returns, but also that the associated costs are substantially higher, leading to (even) lower net returns. As we know from, overhead costs are something people are typically very averse to. Addressing this concern through communication could help mitigate such misconceptions. For example, communicating about net returns could possibly increase acceptance of sustainable investments.

Throughout this project, the research team for this WP will explore ways to address heterogeneity in preferences in communication, particularly how institutions can balance majority preferences with minority dissent and determine whether a sense of participation is sufficient to foster support, even without direct impact on policy outcomes.

Key research questions:

  1. How should institutions communicate about their sustainable investment policies and practices, as well as the broader impact of these activities, considering the unique situation in which participants are “locked-in”?
  2. How can pension providers explain their sustainable investment practices and the rationale behind them in ways that align with the (heterogeneous) preferences and beliefs gathered from participants?
  3. How can communication strategies be designed to address common myths and misconceptions and overcome participant barriers?