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How the UK government finally settled the RI fiduciary duty debate
A statement in the House of Lords last week laid out the government’s view on responsible investment and the law.
It came in a round-about fashion, but an important debate last week in the UK House of Lords (the second UK parliamentary chamber) may have brought to an end the occasional knee-jerk response from some UK pension fund trustees that responsible investment, or the inclusion of ethics in investment, flouts trustee fiduciary duty. For the record, the UK government now believes otherwise. The resonance of its statement will undoubtedly be felt in other countries where much the same legal tussle has been taking place. The debate itself concerned plans for the introduction in the UK of a national system of low-cost, defined contribution personal pension accounts, which it is estimated will bring on stream £4-£5bn ($8-10bn) per annum in new UK pensions money from 2012. These mandatory accounts will be set up to resemble multi-employer occupational pension schemes, albeit with individual savings pots that employers can continue to pay into when they change jobs; something that has hampered previous reforms such as stakeholder pensions, which are employer based. Rumbling away throughout the
discussion for the new UK Pensions Bill that will frame the personal accounts legislation have been questions including whether ethical DC fund options can be offered – as the government intends – but also whether the trusts that are likely to administer the funds could exclude companies from pension investment over environmental, social or governance abuses. Much of this discussion has focused on the default fund where the money of pension savers not making an investment choice – expected to be as high as 85% – will be placed. A surprising earlier amendment in March this year from the UK opposition Conservative party even suggested that fund managers running personal account money should make a clear commitment to responsible investment by signing up to the UN Principles for Responsible Investment, although industry observers believe this is unlikely to make the final legislation. In a bold statement during the debate, Lord Mackenzie of Luton, who is Parliamentary Under Secretary of State for the Lords, representing the government Department of Work & Pensions, delivered a much broader statement
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