Trustees increasingly convinced of ESG investment impact

Survey says alignment of pension fund and company CSR policy growing

Two thirds of UK corporate pension fund trustees responding to a survey carried out by the UK Social Investment Forum (UKSIF) now believe environmental, social and governance issues have a financial effect on their investments. A fifth of respondents said they gave the issues “significant” importance in decision making at the fund.
The findings reflect increasing interest in the way that corporations invest their pension assets bearing in mind the shift by many to prioritise corporate social responsibility (CSR) issues.
A fifth of pension schemes with a responsible investment policy said that “great significance” was now accorded in aligning pension fund investment with the company’s CSR strategy. The same number also said they made explicit references to the pension fund’s policy in the company annual report.
To promote responsible investment amongst corporate schemes, UKSIF has launched a ranking of the UK’s top performers. The £40bn (€58bn) British Telecom Pension Scheme scored highest with a ‘platinum’ ranking of between 81%-100% for its implementation and communication. The report said that the scheme’s trustees: “see responsible investment as part of their fiduciary duty.” Pension schemes in the ‘gold’ ranking of 61%-80% implementation included those of insurance group Friends Provident and Stagecoach, the UK travelgroup. The survey questioned 278 companies, of which 12% responded. Over 90% of respondents said their responsible investment policies covered their entire equity investments, while 57% said they employed the same strategy for bond allocations. Hedge funds were looked at by 63% of the funds investing in the asset class and the coverage was 56% for property and 54% for private equity investments.
The survey found that three quarters of responding schemes actively vote on the shares they hold in companies with 58% delegating this responsibility to their investment manager.
However, UKSIF noted that 153 of the UK corporate pension schemes approached for the survey had declined to participate.
Reg Hinkley, former chief executive of BP Pension Trustees, the £31bn (€45bn) fund for the global oil and gas company, and a member of the UKSIF sustainable pensions advisory board, said corporate pension trustees were still nervous about mixing their fiduciary duty with issues that were perceived as being politically motivated: “This issue needs care and consideration on the part of trustees but most pension fund boards do take a lead from the attitude of the sponsor company and there is an increasingly important link of reflection that is reinforced by this survey.”
(See Editor Comment)