UK - The current credit crisis and market turmoil could present real opportunities for responsible investment as the weaknesses of the existing financial sector are exposed, suggests Howard Pearce, head of environmental finance and pension fund management at the Environment Agency.
Pearce was one of 12 nominees for this year's Outstanding Industry Contribution award at the IPE European Pension Fund Awards in Barcelona last night while the Environment Agency was also the winner of IPE's award for pension fund excellence in environmental and social governance.
Pearce told IPE ahead of the event the responsibility agenda is gradually growing, driven by initiatives such as the UN Principles for Responsible Investment (UN PRI), the Institutional Investors Group on Climate Change (IIGCC) and the Carbon Disclosure Project (CDP).
"To me there's a sense of more mainstreaming of the importance and links between raw materials, energy and climate change and how it links with sustainable business practices, public infrastructure and human health. People are understanding the linkages better, how the ecological flows are affecting the financial flows and hopefully it will flow into investment strategies for the future."
In an interview with IPE, Pearce highlighted one of the biggest problems facing pension funds at the moment is the financial crisis which is flowing through into the solvency of pension funds that in turn is creating long-term worries and a confidence crisis.
However, he claimed there is an environmental crisis from climate change "running alongside the financial crisis which might possibly be more long-term and equally important to investors."
He suggested pension funds should be looking at the allocation of assets, and carrying out health checks to ensure they have their own governance controls in place, a process that the environment agency pension fund has already started.
"We are continuing to take climate change into account, to try and avoid the financial risks and take account of the financial opportunities. I think there is continuing growth in this area and the role of the UNPRI, IIGCC and CDP has helped. All these initiatives have gained momentum over concerns about corporate responsibility and the long-term affects of climate change on people's pensions," added Pearce.
He suggested more people understand how to initiate responsible investing and integrate it into all aspects of asset management and sustainability, through picking high quality companies they understand, which has resulted in more of a track record for these investments.
"There is an opportunity for investment during and after the recession. The responsible investment agenda and enlightened fund managers could benefit from what has occurred and been exposed in terms of some weaknesses of the financial sector. An opportunity to think about this for the future to safeguard investment and get good returns," said Pearce.