Pension funds must become more assertive in reclaiming damages caused by companies in which they are invested behaving improperly, legal experts have argued.
During the annual congress of IPE’s Dutch sister publication PensioenPro in Amsterdam, Guus Warringa of US law firm Grant & Eisenhofer (G&E) said schemes could earn “decent money” from reclaiming damages.
“The money is available, and if you don’t grab it, somebody else will,” he said. “Moreover, it is good for the implementation of the ESG principles.”
Warringa emphasised that ESG criteria was becoming increasingly important, with new generations of investors more focused on sustainability and climate issues.
He also contended that the largest companies usually only listened “when they become aware that it is not only a matter of barking”.
As an example, the lawyer cited the emissions scandal at Volkswagen. G&E represents more than 600 investors in a class action in the US, including more than 40 Dutch pension funds, asset managers, and insurers.
He said investors were unfamiliar with the legal options for reclaiming damages and suggested that pension funds draw up a policy to be ready when a new case arises.
Referring to a similar emissions scandal at Mitsubishi, Warringa said that Japan would be also a good place to bring a case, adding that he expected more “diesel cases”.
According to the lawyer, pharmaceutical firms that suddenly multiply the price of products could also be subject to claims by shareholders who lost out.
G&E is also active in the case against Brazilian state-owned oil company Petrobras, engulfed in a large corruption scandal.
In Warringa’s opinion, while there were 10-15 Dutch pension funds currently participating in legal action, the number could be much higher.
“Schemes that have incurred damage should look at it,” he said.
Also during the congress, Jeremy Lieberman, co-managing director of US law firm Pomerantz, echoed that pension funds should have a procedure in place for analysing potential claims, deciding what the trigger level would be, and how they will take action.
He said that more than $5bn (€4.5bn) of class action settlements had become available in the US last year and that the amount had totalled “dozens of billions” over the past decades.
According to Lieberman, reclaiming damages is also becoming more important in Europe “as investors notice that it is effective”. His company has set up a European office in Paris recently.