USS consults on ethical investment option as it plans defined contribution introduction

The UK’s £40bn (€50.6bn) Universities Superannuation Scheme (USS), the main pension scheme for academics, is consulting with members on an ethical investment option as it plans to introduce a new defined contribution (DC) model.

It comes as USS scheme members campaign for the fund to consider member views on investing responsibly, beginning with divestment from landmines, cluster munitions and thermal coal.

In an email to all USS pension scheme members, seen by Responsible Investor, the fund outlines its timetable on moving some members to a DC scheme and includes a survey asking views on the design of the scheme.

The survey has a section on members’ interest in a specific DC ethical investment option. It asks whether a member would opt for an ethical investment option, and if yes, what approaches should it take.

It asks for views on beneficiaries’ interest in negative screening and divestment on ESG criteria, positive screening on ESG criteria, voting and engagement, and ESG integration into investment decisions. USS also quizzes members on interest in investing in a Shariah-compliant fund.

In a general question on what members feel is the most important attributes of a DC investment fund, one of the four options is investing in companies that operate responsibly. The effort by academics and university staff to get USS to take into account their views on ethical investment has been going for 14 years. The original campaign, which started in the late 1990s under the banner “Ethics for USS”, led to thecreation of ShareAction (then called FairPensions), a UK charity that advocates for responsible investment by pension funds and fund managers.

Last month, ShareAction launched a new phase of the USS campaign dubbed USS: Step Up. It calls on USS to survey members on their views and invite member representatives to annual trustee meetings. In light of member views, the campaign also calls on USS to divest from landmines and cluster munitions; and take climate risk seriously, beginning with divestment from thermal coal.

Catherine Howarth, chief executive of ShareAction told RI: “USS members will no doubt welcome having an ‘ethical’ fund choice on the new DC platform. The design of that choice should clearly take account of USS members’ ethical priorities and perspectives. The same fund members are still waiting, nearly a year on, for the survey of members’ views on the DB section that was promised by the trustees and CEO.

“Over 3,000 USS members signed a petition calling for a survey of members’ views on the DB section, in light of the Law Commission’s report on pension fund fiduciary duties.”

Next month, ShareAction is holding an event at the Grantham Institute for Climate Change, focusing on the risk of fossil fuel investments in USS’s pension fund. They have invited Bill Galvin, chief executive of USS, and Roger Gray, chief executive of USS Investment Management.

The USS member survey on its DC scheme ends on October 16.