As a conscientious investor, I’ve recently started looking at how vegan my pension is. Here’s what I discovered…
What are workplace pensions?
Workplace pensions have been around for decades. The schemes involve employees paying a percentage of their salary at source, into a pension scheme chosen by their employers.
The government did not think the pensions industry by itself was doing enough to attract people into pension plans. Not everyone was eligible or interested – not all workplaces offered such schemes. There were regulation shortfalls… In short, there were serious shortfalls in people planning adequately for their retirement. Which meant more expense for the government when it cam to state pensions.
So it introduced ‘Automatic Enrollment’ into workplace pensions in 2012. This enabled everyone in work to automatically open a pension plan within the scheme their employer had selected.
Here, payments are taken from the salary at a set percentage rate, and in most cases receive a top-up payment from the employer. This in theory ensures a reasonable amount is being paid into the fund.
It meant less in your immediate pay packet – but more financial security for retirement age.
Now, even those working in temporary contracts are eligible for enrollment into workplace pensions. It was even rolled out to those in temporary employment.
Why might workplace pensions be unethical?
The workplace pension sounds amazing on first hearing. But don’t forget – our pensions provider is choosing the companies and funds to invest in – usually based on market performance. And our employers are choosing the pensions provider.
Where this becomes problematic, is when the payee’s personal ethics and beliefs differ from those of the people choosing or managing the pension fund. After all, who wants to hand over their hard earned cash to someone involved in business practices they disapprove of?
For most people, defining what is actually ‘ethical’ though, is extremely difficult: it depends on who you ask.
Early Ethical Pensions
The first ethical pension were brought about by the Quakers, in 1750, and later the Wesleyans, in response to businesses operating in the slave trade.
In the 1960s these schemes had another major boost in popularity. Firstly, the Civil Rights movement boycotted investments with companies who discriminated on grounds of race. Secondly, for those opposed to the contentious Vietnam War, The Pax Fund, a strictly anti-war investment, was set up for those who refused to bankroll violence and/or political oppression.
By the early 1980s, the UK had its first independent research team, EIRIS, looking closely at the content of ‘ethical funds’. And in 1984, Friends Provident, off the back of EIRIS’s research, began their first official ethical, Stewardship Fund.
Today over £900bn is invested in an array of self-proclaimed ethical pensions, and marked against a checklist of Sustainable and Responsible Investment (SRI) strategies.
Whilst it’s still not clear cut what ‘ethical’ actually means, SRIs tend to refer to companies who aren’t involved in the business of arms production, gambling, tobacco or environmental damage, such as fracking and fossil fuel extraction.
These non-ethical industries are termed in the pensions industry as ‘sin stock’.
The trouble with Sin Stocks
So exactly how ethical are these ethical funds for vegans?
In 2020, it was estimated that 14.5% of all total human-caused greenhouse gas emissions worldwide were caused by the livestock industry. Yet, look at most stock indexes and you’ll find at least one company known for producing or selling meat or dairy, among them.
If we want a good return for our investment, it’s fairly obvious that most pension providers will be looking to those same conglomerates for inspiration. In 2015, for example, it was revealed that the UK’s local authorities were all paying into workplace pensions involving livestock-related companies.
These were not subtle mistakes either. In fact they included four of the most damaging livestock business on the planet. Based in China, these companies included Mengniu Dairy and Yili Group (who together control 40% of China’s dairy market). They also included WH Group – the world’s largest pork producer – and Tyson Foods, the world’s biggest meat processor.
Into these funds, Swansea had purportedly invested £12.4m of its workers’ pension plans. Strathclyde and Clwyd both invested £10.3m each – without any of their employees having had any real choice in the matter.
Some councils were able to divest their investments elsewhere. However many councils had pensions administered by the same fund, with only one local council among them named as the ‘administering authority.’ This meant that unless both/all councils wanted to switch funds, they were stuck.
And the employees were really stuck – because if they pulled out of the pension and went it alone, they’d lose the top-up contributions provided by their employers, leaving them financially disadvantaged.
It is sadly not an isolated instance – just one of depressing scale. And as Jordi Casamitjana found out, taking action against it can be problematic.
Vegan Investments
So are any pension funds directly aimed at vegans and vegetarians?
It’s worth noting here I think, that veganism became a Protected Belief under the Equality Act 2010. So it stands to reason, doesn’t it, that we should have provision made for our ethics in our [workplace] pension funds?
Well, vegan pensions funds are slowly but steadily moving into train.
The US Vegan Climate Exchange Traded Fund tracks index performances of vegan businesses in the US Vegan Climate Index. Although based in the US, the fund is open to UK investors. Last year it allegedly outperformed S&P500 funds (including 500 huge companies such as Apple, Microsoft and Amazon).
The fund was developed by Beyond Investing and excludes companies directly involved in any of the following activities:
- Animal testing, farming, exploitation and animal based products.
- Sport, entertainment and leisure using animals.
- Fossil fuels and related activities.
- “Other activities having a significant negative environmental impact”.
- Tobacco.
- Arms.
- Products designed for military use.
- Anything that contributes to human rights abuse with forced labour, or that lacks robust policies surrounding these.
It’s a good start – but with the emphasis very much on who’s out, not who’s in, how ‘ethical’ is it?
Glancing quickly at Beyond Investment’s list of contributing companies will show you that Apple, Microsoft and Google-related company Alphabet are included in the fund. So anyone with issues with their poor labour practices, environmental reporting, or political practices, may be reluctant to invest.
So could it be any good as a vegan workplace pension? Could funds like this one ever be considered truly vegan?
How to ensure your money matters
veganfriendly.org.uk, who reported on the above initially, suggests that, while admittedly problematic for vegan investors, Beyond Investment do at least some headway towards a clear-conscience pension. After all, whilst Apple might sell the odd leather iPhone case, its core business is not directly involved in animal cruelty or products:
“Given the paucity of alternative vegan investments options, we would certainly suggest this still allows the fund to be viewed as ethical”. (source: veganfriendly.org.uk)
And if you can persuade your employer to feel the same way, all the better.
Veganfriendly.org also suggests that whilst there’s no fully-vegan pension out there just yet, there are still some fairly positive options available to vegan investors.
Ethical Options for Investment
Shareholdings
Beginning a portfolio of individual, vegan-only shares is one of these options. It’s a high risk strategy in terms of performance. Also of course, like all stocks and shares investments, it could be considered ‘gambling – a sin stock – for some.
Most financial advisors suggest spreading investments across 20-30 companies, to minimise risk. Additional advice is to look out for handling and exit fees, which can be high.
These investments can also be high maintenance. Ensuring your pension plan remains vegan-only requires personal vigilance, as companies’ undertakings may evolve over time.
Ecotricity and Beyond Meat are both vegan-based companies on NASDAQ now – and doing fairly comfortably. Beyond Meat launched with a share value of $66 in May 2020, rising to $235 by June 2020. When veganfriendly.com wrote their piece in October 2020, BM were sitting comfortably at $195.
Other vegan OTC funds include Maple Leaf Foods, Else Nutrition, Laird Superfood, Tattooed Chef and the Very Good Food Co.
Then there are companies who grow and produce vegan friendly foods. Again here, the advice is to check in regularly to see who’s who. Many grain and soy companies get snapped up by multinationals, who may have non-vegan interests elsewhere in their portfolios. Beyond Meat are now a key supplier for example, to MacDonald’s.
Self Invested Personal Pensions
Vegan friendly Self invested personal pensions (SIPPS) are another option. These can be held instead of, or alongside your workplace pension and receive no contributions from your employer. They could take longer to grow than a regular pension. Double checking your retirement status under this type of plan is also highly recommended.
Non-Pension Options for Vegan Investors
If you decide that moving pensions is just too risky, there are still options available to make your money matter.
Having a vegan diet is still the most impactful thing you can do to reduce climate damage and animal cruelty.
Shopping ethically will also help to ensure that vegan companies you buy from are making money and staying in business. And who knows, with enough shoppers,they may eventually appear in the FTSE100 themselves!
Writing to pension providers, employers, and MPs and pointing out how a protected belief is not being catered for in the pensions industry, could also help to effect change.
Vegan Pensions – Conclusion
The future of veganism looks fairly solid. But when all said and done, making any choice about personal investment really comes down to your own comfort levels. What you decide you’re comfortable with is entirely up to you. But with veganism on a clear trajectory, I’m optimistic that the financial industry will be providing some great new vegan pension options for investors very soon.
