GLOBAL - Implementing a responsible investment strategy need not be at the expense of strong returns and can actually help pension funds make better investment choices, Swedish pension funds heard.
Speaking in a panel debate at the Pension Fund Forum in Stockholm, hosted by GP's publisher Incisive Media, Aviva Investors' head of social and responsible investment Peter Michaelis said environmental, social and governance issues were at the centre of most of the "so-called" unpredictable shocks or events to have hit stock prices over the past 10 years.
He added: "You just need to look at Enron, BP, Lehman Brothers, General Motors - I believe all of these would have been much more predictable if you were looking from an ESG perspective.
"In contrast, companies which aimed to be more sustainable proved to be more resilient. HSBC performed much better than Lehman Brothers, BG Group did a lot better than BP and Toyota did a lot better than General Motors. These are all companies in exactly the same sector but displayed better sustainability. Investing in companies with better sustainability in their operations is a more secure investment."
Michaelis also claimed the pension fund industry collectively held "immense power" and had the ability to act as guardian or overseer of the investment world.
"Just imagine if in 2005 the pensions industry as a whole had said, ‘actually, we're not going to take any of these collateralised mortgage obligations, we don't see them as being fit for our members in terms of investments'," he said.
"That would have been hugely beneficial for the whole financial industry, hugely beneficial for society and hugely beneficial for your members. Yet it's clear as an industry we didn't carry out that role of guardians."
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Labour Party plans to renationalise core industries and require the largest listed companies to hand 10% of shares to employees would be a "double whammy" for pensions, business leaders have warned.
A handful of industry heavyweights have begun trialling a so-called 'mid-life MOT', with positive initial results reported by all those involved.