RI Interview: Donald Macdonald, IIGCC and BT Pensions trustee director retires, and looks at the past, present and future of RI

The first chair of the PRI retires…and this time, sadly, it’s for good.

When Donald Macdonald retires for the second time on January 11, there’ll be many who hope he reconsiders…again. The rest and leisure are thoroughly merited though.
Macdonald, who was lured back from his first retirement to be appointed inaugural chair of the UN-supported PRI back in 2006, spent his last day at the Institutional Investors Group on Climate Change (IIGCC), the body he subsequently chaired, at the end of December. This week (January 11) he will file away his asset manager reports and board papers for the last time as a trustee director at the BT Pension Scheme, one of the UK’s biggest, a role he’s held for almost 20 years after a long career as a telecoms technician and a senior figure over decades in the executive councils of the trades union bodies for communications workers. He is also a non-executive director at Inflection Point Capital Management.
Talking to RI about his second ‘career’ in responsible investment, Macdonald believes there has been good progress against the benchmark that got him into the area in the first place: “As a former trades union activist my involvement has always been about the long-term security of pensions and money not being used for harmful purposes. I think we’ve had some success in that, although there’s plenty yet to do.”
He feels lucky to have met significant people through his career that have helped him further that aim. At the BT pension scheme, he points to Alistair Ross Goobey, CEO in the 1990s of its wholly-owned subsidiary, Hermes Pensions Management, and one of the fathers of UK corporate governance and institutional shareholder activism, as well as Tony Watson who set up the Hermes Focus Funds: “To also be involved in initiatives like the Marathon Club (launched following a 2004 competition run by USS and Hewitt, Bacon and Woodrow entitled “Managing pension funds as if the long-term really did matter”) one of a number of the many successful schemes cooked up by Raj Thamotheram (now an independent strategic adviser) has been great. I’ve been the genuine lay-person in many of these discussions.”
Indeed, if there is a model for the engaged lay trustee it is Macdonald.
When he was tempted out of his first retirement it was by Colin Melvin, another influential colleague at Hermes, who invited him to attend the first ever PRI in Person conference in Zurich “to see what it’s all about”.
“I had no thought in my mind about becoming its chair,” says Macdonald. Within months he was.“The PRI and other bodies in responsible investment have contributed and evolved something very potent: they haven’t delivered all we want, but they have put the issue of long-term returns and their dependency on the ‘health’ of the world economy on the agenda, as well as the idea of the universal owner and how one investment can work against another to the detriment of beneficiaries. I think we achieved a lot at PRI, and it was a pleasure kicking it off with James Gifford (PRI founding executive director). I’ve then had the pleasure of working with another gifted person in Stephanie Pfeiffer at IIGCC and I’m pleased that we’ve taken membership there from 85 to 130+ institutions and built solid relationships with politicians, notably in the European Commission. We are a different voice to the lobbyists they usually hear from telling them to ‘do’ or ‘not do’ things: we’re genuinely looking to work with them over time. Other very progressive relationships have also been built with the OECD, which has done some great work. If I’ve had one frustration with the work at the IIGCC it’s that we haven’t been able to convince more investors to come on board!”
He believes the biggest risk to responsible investment at the moment is policy and the apparent disengagement of politicians from sustainability themes, but he believes the currents remain strong: “The Trump election will be a setback, but as Angela Merkel has noted Trump will be expected to work within a different moral framework than in his election campaign. And the tide of pressing climate, technology, economics, health and social issues roll on.”
A related frustration, he says, has been getting politicians to understand the socio-economic potential for green, sustainable infrastructure during a prolonged period of unprecedentedly low interest rates: “Part of the problem has just been getting governments and their advisors to understand institutional investors, and we need to be careful about how they get briefed so that they do ‘get’ what we are talking about. I was looking at a chart the other day that showed the historically low aspect of interest rates; lowest since the Bank of England started in 1694; lowest even since interest was first charged in Mesopotamia 2500 years BC. This causes huge problems for pension funds, but it could also have opened up huge opportunities for pension funds and governments to jointly finance large-scale infra with cheap money and been the catalyst for creative thinking to reboot the economy post financial
crisis. Instead we had politicians posturing about balancing the books when they should have been investing for growth. We could have the infrastructure for the next 100 years under way: a terribly missed opportunity to date.”
For the future, he says the challenges will be water, food and energy scarcity against a backdrop of population growth, mis-use of information, and terrorism/ medievalism, meaning governments will have to start thinking much more about the global North/South equality/economic development issue.
On the potential plus side of the balance sheet, he says he believes the Workers Capital movement has a positive role to play and that trades unions should be more active in getting their members involved in their pension fundson long-term investing issues. Institutional investors, he said, should also be more vocal about trying to help shape public policy on responsible investing: “In the early days of PRI there was a lot of cynicism from politicians about long-term investing and ESG. But the world has moved on and we have to realize that and capitalize on the change!”
A good number of those who aim to do just that will have been influenced and energised by Macdonald’s example, and wish him the very best in his retirement and more time for his passions, including folk and jazz music, outdoor pursuits and sailing.