UK pension funds want responsible investment assurances

Jan 26, 2015
<p>Sixteen of UK&rsquo;s largest funds urge asset managers to deliver on ESG promises</p>

Some of the UK’s most influential pension funds have joined up to pressure asset managers into making good on promises previously made about responsible investment, the Financial Times reports

The 16 pension funds, which between them hold assets valued at more than £200 bn ($300 bn), have published a guide to increase accountability and transparency between asset managers and owners. 

The publication ‒ ‘A guide to responsible investment reporting in public equity’ ‒ calls for fund managers to fulfill assurances made to invest responsibly when they are awarded a pensions mandate. It also lays out guidelines for how ESG factors can be reported back to investors in good order. 

The group of funds includes the BBC Pension Trust, the Unilever UK Pension Fund and the BT Pension Scheme; Daniel Ingram, head of responsible investment at the latter, says he hopes the guide will encourage fund managers to share the thinking behind their investment decisions. ‘What asset managers tell us they are going to do in terms of responsible investment when they pitch for our business, and what they actually deliver, can be very different,’ he explains. 

‘We encourage public equity fund managers to use this guide as an opportunity to take a step back and reflect on their approach to responsible investment. We ask the portfolio managers in particular to share with us their valuable insights on responsible investment at both the portfolio and stock level.’ 

Other large investors involved in publishing the guide include Railpen, the Kingfisher pension fund and USS Investment Management. Dawn Turner, head of pension fund management at the Environment Agency Pension Fund and a further supporter of the guide, says the document will be an ‘excellent tool’ for furthering progress. 

‘Communication is key to long-term relationships,’ she adds. ‘Long-term relationships are key to financial performance. We want good-quality, meaningful reporting from our fund managers to support this.’ 

The guide divides potential actions into two broad categories, covering ESG integration and stewardship, and explores ways in which both practices could help determine how ESG factors contribute to long-term, risk-adjusted returns. 

While the group advises that the document’s recommendations will be more relevant for some investment strategies and styles than others, it notes that stewardship activities should be considered a ‘core requirement’ for both passive and active public equity managers.

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