EUROPE - For the majority of the respondents to an IPE survey environmental, social and governance (ESG) issues are part of fiduciary duty.

Around 70% of the 42 respondents - with a total of €197.6bn invested assets - said it was trustees' fiduciary duty to include ESG in their decision-making process and during manager selection processes. Only a quarter disagreed with this.

"The so-called [McGerry] judgement has been superseded by modern legal opinion [such as the] Freshfields opinion for UNEP FI, which suggests that it is a fiduciary duty to take ESG into account," said another UK scheme.

But a Dutch fund argued ESG was not part of its fiduciary duty because "we have to make an investment return."

Over 51% of the respondents were unsure as to whether ESG investments would help generate a higher return. But only one Danish pension fund thought ESG policies would lead to reduced returns due to the limits it puts on investment opportunities.

"[Returns] may be not higher, but more stable returns might be expected in combination with a lower risk profile (less volatility)," said a Dutch fund.

A majority of 39% thought that ESG would benefit from the financial crisis, compared to 31% who disagreed.

"[The] present financial crisis was caused by a strong focus on fast wins and good performance for the next day only," said a Dutch fund. "One of the aspects of ESG is that it focusses on a good and sustainable performance for the long/er term."

"[ESG] is a trend not related to the financial crisis," explained another Dutch scheme, while a UK fund added: "There is a move towards non-toxic assets."

But a Danish scheme said: "[ESG will receive] less focus than would otherwise have been the case because yield problems have become more important."

And 67.5% of the respondents said they had not been paying any more attention to ESG since the start of the financial crisis. "We are implementing our policies as planned," explained a Dutch fund. "[There is] no reason to change plans due to changing market conditions."

But another Dutch fund said: "Positive returns on the short term come first now. ESG is more for the long-term."

See Off The Record in IPE's October issue.

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