UK workplace pension funds will be required to produce sustainability assessments of their investment decisions under new government regulations proposed today.
The Department for Work and Pensions said trustees would need to make these assessments available to scheme members so that they can see how their savings are being put to work.
It is hoped this will incentivise managers to funnel the £1.5trn held in workplace pensions towards environmentally and socially responsible companies, better reflecting the attitudes of younger savers.
Work and pensions secretary, Esther McVey, said: "The younger generation are increasingly questioning that their pensions are invested in a way that aligns with their values.
"This money can now be used to build a more sustainable, fairer and equal society for future generations."
Today's proposals are subject to a consultation closing on 16 July this year, with pension scheme trustees, managers, beneficiaries and other stakeholders all invited to contribute.
The Institute and Faculty of Actuaries' president Marjorie Ngwenya said the consultation must be seen as a 'call to action' in relation to environmental, social and governance factors.
"Those individuals who are being automatically enrolled into a pension as they enter the workforce will be saving for decades to come," she continued.
"It is important investment managers not only think about financial returns, but also the impact those investments are having on the kind of world we will be living in by the time they come to retire."
This comes after a report released last week revealed that six of the nine largest workplace pension providers have no policy preventing investments in firms that profit from chemical weapons.
It also shows that The National Employment Savings Trust (NEST) is the only provider to have a measurable, time-bound target to reduce its exposure to climate change risks.
In addition, it was found that NEST is one of only two providers that have specific policies on how they are actively encouraging responsible tax conduct by investee companies.
With a surge in opt-out rates predicted over the next year, workplace pension providers are now being urged to communicate more with members, particularly younger savers.
Frank Field, chair of the Commons Work and Pensions Committee, said: "This new generation is especially well placed to take the long view and realise the benefits of a retirement plan that is truly sustainable for them personally, for their fellow citizens and the planet."