Pension funds need to consider alternative approaches before deciding to divest from areas such as fossil fuels according to three major schemes.
Speaking at the Pensions and Lifetime Savings Association Investment Conference, Environment Agency Pension Fund chief risk officer Faith Ward said the scheme had come under pressure to divest in the past.
"We decided to take a more nuanced approach that is very much risk and evidence based," she said. "We feel we have developed a pragmatic approach that better looks after our members' interests," she said.
RBS chief investment officer Robert Waugh agreed, saying that engaging with companies often brought better results.
"You have to look at whether there are risks to the assets you own and we have looked to do this via engagement," he said.
"The second way we have chosen to do this is to provide capital. For instance we now own four wind farms - these are a great investment for pension schemes offering inflation linked returns and diversification. We are also looking at solar power and have a large timber portfolio. Dealing in secondary equity markets provides no capital to anyone."
However, Ward said schemes need to better understand the environmental risks that may exist in their portfolios if such approaches are to work.
"This is not just about fossil fuels," she said. "You also need to have understanding of what the carbon risk is in your real estate portfolio for instance."
NEST chief investment officer Mark Fawcett agreed but said accessing data can be difficult.
"We need to have access to more and better data. Do you know what the carbon footprint of your real estate portfolio?" he said. "If you ask your managers then they should be able to provide you with this kind of data."
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