The Principles for Responsible Investment (PRI) has put out a request for proposals for a research project looking what factors influence the overall sustainability of pension systems in a bid to boost the potential for pension schemes to put more capital into responsible investment.
Specifically, the research, focusing on the US, the UK and Australia, will explore the relationship between the “structure, policy and regulation of pensions systems” and their sustainability. The “working assumption” behind the proposed research is that such pension system structural factors “significantly influence” the extent to which pension schemes are “able to adopt responsible investment practices and allocate capital to sustainable economic activities”.
This link, however, is “consistently” not being considered by policy-makers and the pension industry, according to PRI. The research will focus on the entire pension ecosystem of the three countries, minus those segments which are paid directly from general taxation revenue – so called pillar one schemes: “By researching pension structures and policy, we aim to better understand the relationship between pension system design and responsible investment and sustainable capital allocation”, the proposal says.
The document also says that it is the “small, single-employer schemes” in “fragmented, competition-based pension markets” that are most inhibited on sustainability by existing frameworks. Smaller pension schemes, it says, are often more reliant on investment professionals – consultants, financial advisers, platform providers and fund managers etc. – that have little incentive to “innovate or pursue advanced responsible investment strategies”.
As a result, it says schemes are forced to “mostly rely on investments in public markets, predominantly passive equities”, which “further limit” their ability to be active owners and allocate capital to sustainable economic activities.The PRI’s planned research report will cover:
1. A pension structure review
a) Detailed mapping of the structure of each national pension system, including the
different types and vehicles for delivering pensions;
b) A stakeholder chain analysis (incl. beneficiaries) for each country and type of
pension delivery to highlight potential agency problems;
2. Analysis of strengths and weaknesses
a) Country-by-country analysis of barriers within investment practice, market structure and policy and regulation to responsible investment and the sustainability of each pension system, and;
b) Inter-country comparisons and perspectives on strengths and weaknesses.
The successful bidder for the proposal will present a draft to the PRI in February 2020, a month before the final report is due.
Prospective applicants have until the 30 September to submit their proposal.
The tender documentation can be seen here: Click link