Pension funds key players in driving responsible investment

The UK’s leading pensions body today (Tues) launched a guide to responsible investment to encourage its members, who control £900bn of assets, to create an investment climate where consideration of ‘extra-financial factors’ is the norm.

The National Association of Pension Funds’ (NAPF) guide sets out key actions that pension funds should take to understand and manage Environmental, Social or Governance (ESG) factors, embed them in their investment policies, select appropriate investment managers and hold them to account.

The guide, which updates the NAPF’s guidance from 2009, also looks at individual asset classes like hedge funds, real-estate and corporate bonds, and suggests key points pension funds should consider and questions they should ask of their investment managers.

David Paterson, Head of Corporate Governance, NAPF, said:

“There is clear evidence that extra-financial factors can have a big impact on a company’s long term value, reputation and growth. Successfully bringing these factors into investment decisions can help moderate risk and improve returns.

“The Stewardship Code has helped raise awareness of the need for good governance, and that agenda should be widened to include environmental and social matters. While interest in responsible investment has grown in recent years, we still have some way to go before it could be said to be fully mainstream.

“There is a lot that pension funds can do to help make responsible investment the norm, and we hope that our members will follow the guidelines we have set out. They should develop clear policies that reflect ESG factors in decision-making, and exercise stewardship responsibilities such as engagement and voting. It is vital to select investment managers that act as responsible investors and report clearly, and to then hold them to account.”

The guide highlights that fixed income represents a growing share of most pension fund portfolios, and that responsible investment considerations are as relevant to fixed income investment decisions as they are to equity investments.

The guide also charts the development of responsible investment and clarifies how it fits in with pension funds’ fiduciary duty. It explores a number of real-world examples to make the case for an increased focus on extra-financial factors when making investment decisions.

 

Notes to editors:

1. The NAPF is the leading voice of workplace pensions in the UK. We speak for 1,300 pension schemes with some 16 million members and assets of around £900 billion. NAPF members also include over 400 businesses providing essential services to the pensions sector.

2. The NAPF Responsible Investment Guide can be downloaded here.

Contacts:

Paul Platt, Head of Media and PR, NAPF, 020 7601 1717 or 07917 506 683, [email protected]
Aimee Savage Richards, Press Officer (interim), 020 7601 1718 or 07825 171 446, [email protected]