Responsible Investor

Why are corporate pension funds hiding from SRI?

Corporate social responsibility is everywhere, but companies are failing to spot the potential for their pension funds.

Investment managers politely call it the ‘disconnect’ when talking with their corporate pension fund clients. In reality it’s an aching gulf.
While companies are falling over themselves these days to prove their green credentials and ensure they are not hit by risky business relationships, their pension funds are hiding in the shadows. Few have taken measures to look at environmental, social or governance issues concerning their huge pots of retirement assets.
One unsettling finding of the interesting recent survey of UK corporate pension plans by the UK Social Investment Forum, was that out of 278 companies surveyed, 153 declined to participate. Had the survey been an opportunity to brandish the latest corporate wisdom on sustainability and climate change, it’s certain the participating numbers would have been much higher. It’s difficult therefore to argue that corporates don’t have the time to fill out such surveys or to devote time to the issue.

Speaking at the UKSIF launch of the survey, Reg Hinkley, former chief executive of BP Pension Trustees, the £31bn (€45bn) fund for the global oil and gas company, and a member of the UKSIF sustainable pensions advisory board, said corporate pension trustees were nervous about mixing their fiduciary duty with issues that were perceived as politically motivated.
He has a point, although there are few people around who still argue that climate change is a political axe. Many companies have recognised it as the defining issue of our times and are rapidly aligning their business models accordingly.
A counter argument is that the fiduciary duty of corporate pension fund trustees needs to take into account the commercial logic of social responsibility being pushed by their sponsor. After all, that is where investment returns could lie. Shareholders expect nothing less of the companies they invest in, so why should pension fund members get any less?

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