Australian pension funds could soon become the biggest shareholders in their country’s equity market (see page 5), with researchers at Rainmaker Information forecasting their combined domestic stock holdings to hit 60% by 2033.
While Australian defined contribution (DC) schemes are generally larger than their European counterparts in terms of scale, investors in Europe should be prepared to take on more active responsibilities as shareholders as their markets and assets grow in the years ahead. As the saying goes: With great power comes great responsibility.
AP7 is an example of an increasingly powerful investor using its influence as an active – and activist – investor. In the past few months it has joined several shareholder campaigns calling for change at some of the world’s largest companies. The UK’s NEST is another emerging DC investor that has backed shareholder campaigns on issues such as climate change – see pages 12 and 13 for a summary of some of the latest developments in this area.
Following last year’s report from the Intergovernmental Panel on Climate Change, it is widely agreed that the world is at a critical stage in terms of reducing greenhouse gas emissions. Pension fund investors are playing an important role in this effort.
NEST and AP7, along with dozens of major defined benefit schemes, have taken action because they see it as part of their fiduciary duty as long-term asset owners to ensure money is invested for non-financial positive outcomes, on top of the investment returns they hope to make. Those responsible for DC funds, however small, should have this in mind as national regulators and the EU move towards implementing stronger rules around emissions and waste that could significantly affect the companies in which they invest.
Nick Reeve, News Editor