JP Morgan's Benjie Fraser wonders whether socially responsible investing might lead to consolidation among pension funds.

Responsible investing - what is it? During a recent trip to Asia, I met a number of high-profile public funds that have begun to ask themselves this question. During visits to Brisbane, Melbourne and Taipei, I saw that an increasing number of senior figures in these organisations are beginning to examine how they can put into practice the United Nations-backed Principles for Responsible Investment Initiative (PRI).
PRI is, in fact, a network of international investors working together to put the six principles of PRI into practice. The global pensions industry devised the principles themselves to reflect the view that environmental, social and corporate governance issues (you've heard of ESG?) can affect the performance of investment portfolios and therefore must be given appropriate consideration by investors if they are to fulfil their fiduciary duties.
The principles provide a voluntary framework by which all investors can incorporate ESG issues into their decision-making and ownership practices, and so better align their objectives with those of society at large. Importantly, the principles are based on the premise that ESG issues can affect investment performance, and the appropriate consideration of these issues is part of delivering superior risk-adjusted returns and therefore firmly within the bounds of investors' fiduciary duties. PRI clearly states that they are to be applied only in ways that are consistent with those duties.
Ok so far?
So where does it leave the pension fund organisation of the future? Will it be likely to have more resources in-house? Are the bigger likely to get bigger? It feels that way. Certainly, the view of certain large Australian pension funds or Supers is that they want to play a more active part in the investment process as it relates to the long term. Pension funds acting more like sovereign wealth funds as they look at the future health of society? Not quite.
Still, from small acorns mighty oaks do grow.

Benjie Fraser is Global Pensions Executive at JP Morgan's Worldwide Securities Services business