Social pension funds now on the agenda with new Hermes-backed UK taskforce

Discussions taking place with fund managers and pension platforms

Big Society Capital and Hermes Investment Management, the fund manager owned by the BT Pension Scheme, are involved in a new taskforce on ‘social pensions’ set up by the UK National Advisory Board on Impact Investment.

The taskforce, which also includes Catherine Howarth, chief executive of ShareAction, is investigating how to develop social pension funds in the UK.

The UK National Advisory Board on Impact Investing was formed as part of the G8 Taskforce on Social Impact Investing chaired by Sir Ronald Cohen. The UK NAB now reports to the Global Impact Investing Steering Group, and its members include David Blood, co-founder of Generation Investment Management and Keith Smithson, Managing Director in Treasury at Barclays and Saker Nusseibeh, chief executive of Hermes.

Simon Rowell, Senior Director, Strategy and Market Development at Big Society Capital, who sits on the taskforce, told RI it was in discussion with investment managers and pension platforms to bring a more formal partnership together.

And this week Big Society Capital, the social investment body, has released a paper exploring designing a social investment fund for UK pensions. The paper, written by Rowell, includes input from impact venture fund Bridges Ventures, Schroders, ESG research firm Sustainalytics, the London Business School and UK government department the Cabinet Office.

The UK government has already expressed interest in introducing social pensions. Minister for Civil Society Rob Wilson said earlier this year that he was interested in developing “social ISAs” and requiring “pension providers to offer products to scheme members where a specified percentage of their money goes to social investments”.Rowell said Big Society Capital’s plan was to create the first few products for ‘social pensions’ so the government could see what funds could look like and then use policy to accelerate further development.

Big Society Capital is in close engagement with France where by law pension providers for French employee savings schemes must offer the option of at least one solidarity fund or ‘fonds solidaires’, which provides a mix of socially responsible and high impact social investments.

The rule was introduced in 2010 and assets in solidarity funds have now reached more than €6bn.

“We’ve been speaking to BNP Paribas for quite a while,” said Rowell. “They are a huge source of expertise and evidence for how it could work in the UK.”

Big Society Capital’s new paper looks at how easily the solidarity fund model can be applied to the UK and finds a mixed picture. While both countries have similar key stakeholders to engage, there are broad differences in the definition of ‘social investment asset classes’, meaning the investment universe is smaller in the UK than in France.

Rowell said the social investment market in the UK was estimated at £1.5bn. “There are broadly two different types of assets: social impact and public purpose assets, such as housing associations, local authorities and universities. We think there are enough of these public purpose assets to start these social pension funds as the social impact investment market develops”

In support of Big Society Capital’s initiative, the Social Investment Research Council has commissioned social investor Ethex to survey members of the public on why they make social investment and what could motivate them to engage with the space. Rowell said it was important to get a complete picture to reinforce the case for a social pensions product.

“People aren’t engaging with their pension fund choices,” said Rowell. “If you set up in a way that aligns with what they care about it would be a pull to fuel individual saver interest.” Link