Pension funds target pressure campaign on non-UNPRI asset managers

Two of the UK’s biggest pension funds are to launch a campaign to pressure some of the world’s biggest investment managers to sign up to the United Nations Principles for Responsible Investment, or explain why they won’t. The £30bn Universities Superannuation Scheme (USS) and the £1.5bn Environment Agency are targeting Barclays Global Investors, Capital International, Citi, Credit Suisse, Fidelity, L&G, Merrill Lynch, Northern Trust and UBS. Amongst the managers are subsidiaries of some of the largest global banks such as Barclays, UBS and Merrill Lynch, involved in massive write-downs in the current credit crunch. The UK pension funds have issued a call for support amongst more than 400 of the world’s biggest investors representing $15 trillion in assets that make up the membership of the UNPRI.
They say they will write a letter to the asset managers to ask them to sign up to the UN principles, which encourage managers to focus on governance, social and environmental issues in their investment. The letter will ask the fund managers to explain why they won’t sign up to the UN benchmark, should they decline. The PRI, which was launched in 2005 has been backed stronglyby UN secretary general, Ban Ki-Moon. Pension funds, which are estimated to hold approximately a third of global stock market assets, are becoming increasingly vocal about demanding that asset managers sign up to the UN standards before they are mandated to run scheme assets. Earlier this month, the Environment Agency pension fund terminated investment contracts with managers and cited their non-adherence to the PRI as an important part of the decision, alongside investment performance problems. Capital International, the US house, lost the brief to run £67m in global equities assets, while State Street Global Advisors, another US fund manager, lost a £73m portfolio of global shares and £35m in UK shares. The other £10m was taken from part of a passive global equities mandate managed by Legal and General, the UK fund manager. Al Gore’s green fund management house, Generation Investment Management, was one of the winners among the new managers appointed to run the money, as were RCM, and Impax Asset Management. Large European pension funds including France’s €34bn ($54bn) French pensions reserve fund (FRR), include PRI membership as

an integral part of their manager selection process. Howard Pearce, head of environmental finance and pension fund management for the Environment Agency, said Capital International and State Street had told him they supported the PRI in principle, but argued that they had their own internal codes and mechanisms. “Some fund managers say they can’t commit to the PRI because of their size, or a lack of management support orbecause of compliance issues. They might have a point, but we want to hear this fully explained. The PRI is an aspirational set of principles; you don’t have to pass a test on day one to join up. There is also the possibility that you could sign up sub-bodies within an organisation.” The pension funds said the campaign would start in October once they have gathered support from other PRI members.