Environmental-, Social-, and Governance-Oriented Pension Funds for Young Contributors: A Win–Win Option

Elisa Bocchialini (), Demetrio Miloslavo Bova, Ilaria Colivicchi and Federica Ielasi
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Elisa Bocchialini: Department of Economics and Management, University of Florence, 50121 Florence, Italy
Demetrio Miloslavo Bova: Department of Economics and Finance, University of Rome Tor Vergata, 00133 Rome, Italy
Ilaria Colivicchi: Department of Economics and Management, University of Florence, 50121 Florence, Italy
Federica Ielasi: Department of Economics and Management, University of Florence, 50121 Florence, Italy

Sustainability, 2024, vol. 16, issue 24, 1-19

Abstract: The world’s 300 largest pension funds manage assets for more than USD 21 trillion. A strict orientation to environmental, social, and good governance (ESG) in the investment portfolio of pension funds can play a key role in triggering the economy toward a sustainable transition. Can responsible pension plans be an attractive investment opportunity for young people? Since the performance of pension funds depends on the demographic characteristics of investors, other than the financial results of investment portfolios, this study aimed to test the convenience of ESG-oriented pension plans for young contributors aged 20–29 with different risk propensities and attitudes towards sustainability. The analysis was started using accurate data provided by an Italian pension fund, observed from 2012 to 2022. The methods applied were a Monte Carlo simulation of the individual actuarial balances, the expected utility, and the willingness to pay. The results show that ESG-oriented pension funds are convenient for young people who invest in riskier lines. Still, it is sufficient for a light green preference to persuade young contributors to invest in ESG-oriented funds and balanced lines. The results of the study can support pension fund managers in defining and offering appropriate ESG lines suitable for younger investors.

Keywords: ESG; SRI; portfolios projections; actuarial balance; pension fund (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2024
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