Rise in UK schemes backing ESG impact on long-term performance: UKSIF

A significant majority (94%) of the UK’s largest pension schemes (£1bn +) responding to a survey by the UK Sustainable Investment and Finance Association (UKSIF) say they believe that environmental, social and governance (ESG) factors can have a material performance impact on investments in the long-term. UKSIF said the figure for the same question to larger schemes in its previous 2007 survey was 79%. Across the whole sample of UK funds – 32 schemes responded to the survey – the figure was slightly lower at 75%, albeit up on 67% in 2007. Smaller UK pension funds, however, appear less convinced, with just 50% in agreement, down from 58% in 2007.
Notably, four-fifths of all responding funds said they now had a responsible investment policy, up from two-thirds in the last survey. Nonetheless, the report revealed that UK pension funds appear reluctant to provide detailed communication on their responsible investment activities to their members. Just one in ten responding funds said they published their annual voting records and fewer disclosed any corporate engagement strategies they have with companies. In terms of the implementation of responsible investment into fund manager briefs, the UKSIF survey shows a marked rise inthe number of specialist mandates being handed out with 15% of responding funds saying they did so against none in 2007. Almost half of the respondents (48%) said they now integrated ESG research into their investment decisions, up fro 38% in 2007. Screening of portfolios for irresponsible companies has also risen to 30% (17% in 2007) and investor collaborations have become increasingly important (26% in 2009 against 8% in 2007).
In UKSIF’s ranking of UK pension funds on their responsible investment implementation, the BT Pension scheme came out as the only ‘platinum’ rated top – scoring fund. The pension funds of Barclays, BP and HBOS were rated gold, while 13 funds were given a silver rating. Michael Deakin, chair of the UKSIF Sustainable Pensions Advisory Board, said: “Given all the challenges faced by pension fund trustees over the last two years, I find the clear signs of progress made on implementing responsible investment policies very encouraging. More funds now have a responsible investment policy, and more significantly, of those funds that completed both the 2007 and 2009 surveys more than half have achieved a higher ranking this year.”