UK - Nine out of 10 trustees believe pension fund activism will have a long-term effect on how companies manage environmental and social risks, a new survey shows.
The research – compiled by business school Ashridge and Just Pensions, part of the UK Social Investment Forum – found that 80% of the 130 respondents believed effective environmental management could raise the market value of companies.
But more than half of respondents wanted additional government legislation to ensure all pension funds report on SRI issues and called for regulation to ensure defined contribution schemes provided an ethical option.
The survey – carried out between September and December 2003 – also showed a demand for improved reporting from companies. Less than 20% of respondents believed sufficient information was currently provided.
Association of British Insurers head of investment affairs Peter Montagnon welcomed the growing recognition that social, environmental and ethical matters had an impact on the “financial health” of companies.
But National Association of Pension Funds chief executive Christine Farnish said there was disagreement over how significant responsible corporate behaviour had been in raising the long-term market value of equities.
She said: “Some trustees feel that uncertainty about the significance of longer-term financial benefits limits their activity in this area. There is a challenge here for advisers and consultants to improve techniques for evaluating impact and risk.”
She added: “It is surprising that the majority of respondents seemed to feel that regulation was needed to get pension funds to implement their SRI policies, as the solution is surely in trustees’ own hands.
“On the other hand, some sort of legal requirement for institutional shareholders to vote on SRI matters could help encourage more serious consideration of these issues.”
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The lifetime allowance should be scrapped and replaced with a lower annual allowance, last week's Pensions Buzz respondents said.
Action for Children Pension Fund has outsourced its pensions administration to Trafalgar House.