Half of UK’s biggest pension funds have no ESG policy

UK lobby group FairPensions says lack of voting disclosure could prompt government action.

Half of the UK’s 20 biggest pension funds have no apparent policy covering climate change or human rights despite their sponsors being amongst the biggest supporters of corporate social responsibility, according to a report by FairPensions, the pensions lobbying group sponsored by non-governmental organizations (NGOs) including Amnesty and WWF.
In addition, the report says only a fifth of the 20 biggest schemes disclose their shareholder voting records, a shortcoming which the lobby grouped warned could provoke the government to make voting disclosure mandatory, which it has the power to do under the UK Companies Act. The report said it was “concerned” at the lack of shareholder engagement by pension funds, noting that they may be sacrificing the prospect of better returns as well as their considerable influence over corporate policies affecting the economy, society and environment.
Those schemes out of the UK’s biggest 20 paying the least attention to environment, social and governance issues (ESG) are Barclays Bank UK Retirement Fund, BAE Systems Pension Scheme, and National Grid Pension Scheme, which all scored less than 1 out of 10 on the FairPensions ranking of adherence to generally recognised ESG best practice principles.
The pension schemes of UK banks tended to be among the poorest converts to ESG, despite increasing evidence that investing according to such criteria does not affectinvestment performance.
Conversely, the report pointed out, UK banks are heavy promoters of good corporate practice at a sponsor level. Most of the pension funds in the lower half of the top 20 table showed no improvement on last year’s ESG implementation levels. In contrast to banks, UK local authority pension schemes appear highly motivated on ESG, making up a significant number of the best performing schemes.
At the top of the table, jointly led by the Universities Supernannuation Scheme, the BT Pension Scheme and the British Airways Pension Scheme with nine points each, significant improvements were recorded against 2006, notably the rise of British Airways from ninth position last year.
Strathclyde Pension Fund Strathclyde, which came second in the ranking, nearly doubled its 2006 ESG score. The West Midlands Pension Scheme was placed fifth.
Colin Hartridge-Price, secretary to the trustees of the BT Pension Scheme, said: “The BT Pension Scheme regards good scheme and corporate governance as hugely important, and we focus a lot of energy in this area. However, we do not publicly disclose details of the engagements with companies that have taken place on behalf of the scheme, as we consider this would harm our ability to work with companies in the future.”