Global trades union chief calls on PRI to be more activist and coalesce around G20 long-termism

South Africa’s Minister of Finance, Pravin Gordhan, also addresses annual PRI in Person conference

Sharan Burrow, General Secretary of the International Trade Union Confederation (ITUC) called on investors at the annual PRI in Person conference in Cape Town, South Africa, to coalesce around the recently published G20 Principles for Long Term Investment by Institutional Investors, which she said was a road map for “patient, productive and engaged capital”. Burrow, who heads up ITUC, which represents 175 million workers in 155 countries by way of 311 affiliated trades union organizations, made one of the opening keynote presentations at the PRI in Person yesterday (October 1). She said that the G20 principles – which followed OECD recommendations – if observed and implemented effectively could help workers pension funds shift toward long-term investment. In its communiqué, published at the St Petersburg Global Leaders summit in September, the G20 said that as part of this long-term focus investors should consider ESG risks in strategy and align their contracts with fund managers around “long-term risk/return criteria”.
The G20 communiqué , Burrow said, would also require appropriate disclosure by institutional investors about how they are investing for the long-term. However, the ITUC chief noted that while the OECD’s definition of long-term investment was welcome, it said nothing about how ESG should actually be implemented by investors in mainstream investment policy or in the reporting framework of asset managers and invested companies. This, she said, was where the PRI had an important role.
Following the publication of the latest Intergovernmental Panel on Climate Change (IPCC) report, Burrow told the conference that she found the “barely”
2% of pension fund assets invested in climate-change prevention related assets “shocking” given that the duration finance of climate change projects matched the liability profile of pension funds.She said it should be theoretically possible to raise this to 5% in a 3-year period generating some $300bn in annual flows into green assets. But she said organisations like ITUC and the PRI had “a job to do” regarding public policy. As long as governments let fossil fuels subsidies co-exist with clean energy policy, she said, there was little chance that investors would have confidence in carbon prices and on the comparative returns of clean energy. However, Burrow said she believed investors had to be serious about disclosure on climate change and that she had seen significant resistance to the Asset Owners Disclosure Project (AODP), which requests transparency on C02 exposure by pension funds, and where she sits on the board: “If we are demanding it of corporations surely it is fair to have equal treatment of our own.” Burrow called on the PRI to be more activist in its approach to big social issues including corporate tax avoidance. She highlighted the G20’s Base Erosion and Profit Shifting (BEPS) Action Plan, 15 measures against aggressive tax planning by multinationals: “It would seem in line with PRI principles that it is important to address the extent to which workers’ pension funds actively address the risk of BEPS through their shareholdings in listed assets, but also their business relationships with private funds, including hedge funds and private equity groups.” Pravin Gordhan, The South African Minister of Finance, addressing the conference, also said corporate tax avoidance could be an area where responsible investors could play a significant role: “Companies are looking to minimise or avoid tax and responsible investment could lead to a change in behaviour of these companies because tax avoidance as a contribution to the bottom line is not an acceptable practice.” Gordhan said pension fund assets were the money of working people and that PRI had an important role to play in encouraging companies to pay attention to issues like labour rights, higher ethical standards and helping pensioners retire in a decent world.