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IPE special report May 2018

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€24bn UN pension fund ‘reviewing strategy’

GLOBAL – The $29bn (€24.7bn) United Nations pension fund may be reviewing its investment strategy to bring it more in line with the body’s humanitarian-based mission and objectives.

A report earlier this week accused the fund of disregarding the UN’s own principles when investing.

It emerged that at least a dozen of the 400 companies invested in by the scheme don’t comply with the UN’s own “Global Compact” for corporate behaviour. These included mining giants Anglo American and the Rio Tinto Group, and a $275m investment in Exxon Mobil Corp, which opposes the Kyoto Protocol on climate change.

Commentators stated that this greatly undermined the UN’s credibility as a body urging firms to adhere to principles of corporate responsibility.

“I don’t know what stage of deliberation the UN is in with respect to the management of its funds, but I expect that their pension fund managers and trustees are proceeding with appropriate deliberation, as any fiduciary should, in examining any change in investment criteria,” Julie Gorte, chief social investment strategist at consulting firm Calvert Group, told IPE.

Gorte was quoted in the report as saying the UN screening process – if existent – was minimal, and did not take certain issues such as human rights, product safety and integrity and indigenous people’s rights into account.

However, she stated that it is often easier for observers to point fingers.

“It’s important to remember that socially responsible investment is still, to a lot of pension funds, a kind of new kid on the block, and no responsible fiduciary leaps into a new discipline, no matter how appealing, without a lot of due process and thorough vetting.

“The UN is moving in the right direction, which is a great credit to the institution. Many other institutions aren’t even at the point of seriously thinking about SRI yet.”

A report by Freshfields Bruckhaus Deringer – commissioned by the UN Environment Programme’s Finance Initiative (UNEP FI) Asset Management Group, of which Calvert is a member – stated that the links between environmental, social and governance-related factors (ESG) and financial performance are being increasingly recognised.

According to Gorte, this is one factor “helping to move the UN and many other thoughtful institutional investors round to seeing that SRI can be done without compromising returns, while giving the investors more comfort that their own investment capital is not creating headwinds that they must battle in their daily work lives”.

The UN did not respond to questions from IPE and Anglo American declined to comment. The Rio Tinto Group stated that it has a code of business practice and is supportive of sustainable development and giving back to communities.

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