The chief executive officers of two major UK pension schemes told an online audience yesterday that companies behaving in a socially-irresponsible way during the coronavirus crisis will not be supported by government, consumers – or pension funds.
Speaking in an online investment panel discussion, Simon Pilcher, CEO of USS Investment Management, said: “Those businesses that are going to look to exploit the current situation, and say just because I can, I will cut my workers’ wages by 20% and thus grow my bottom line […] I think they will be met with savage opprobrium.”
They would be scorned in the press and probably by their consumers who would vote with their feet, the head of the UK universities pension scheme investment arm said, adding that such companies would also be “brutally treated” by governments.
“Thus I would say that is a poor business decision for them to be engaged in that and that is not the sort of business we’d be backing. That’s not the sort of activity we would be encouraging,” Pilcher told the audience at the asset owners event held by Bloomberg.
Fellow panelist Morten Nilsson, CEO of the BT Pension Scheme, said that in his view, ESG was becoming much more important as a result of the pandemic.
“In this situation we are in where the government response has been so bold and so extreme, paying salaries to private sector employees for quite a while – the other side of this is the expectation that these companies will do their duty and be good corporate citizens and actually repay society,” he said.
This pressure would only increase, he predicted.
“I think we’re seeing in quite a few countries part of the population starting to be more accepting of tax rises potentially coming out of this crisis, but I don’t think they will be more accepting of companies not behaving well on the other side of this.
“I think we’re seeing in quite a few countries part of the population starting to be more accepting of tax rises potentially coming out of this crisis”
Morten Nilsson, CEO of the BT Pension Scheme
“My view is that will be increasingly both on the corporate side of behaving well, but also that asset owners are behaving well and perhaps the more aggressive types of capitalism won’t have a place here,” Nilsson said.
Looking further ahead, Nilssen said he believed in the notion of a green post-COVID-19 recovery as a huge opportunity.
“I think that if we implement that successfully, that will change the world in numerous ways and actually through growth and investment returns, it will be the right thing,” he said.
Interesting opportunities in infrastructure could arise over the next few years out of the current crisis, he said, having mentioned that the BT scheme was still in the process of a long move to shift its low-yielding traditional assets to more “cashflow-aware” assets.
Right now, the BT pension fund was also interested in technology investments, he said, with that sector having been performing well though the crisis.
On the subject of reallocation decisions pension funds had made so far in the coronavirus crisis, Pilcher said USS had taken the opportunity to shift much of its US fixed income assets to UK equivalents.
“We held quite a lot of US conventional long-dated fixed income instruments and as those frankly went to the moon and outperformed all assets – particularly as there was a flight to safety, a flight to liquidity – we used that as an opportunity to reposition a lot of those back into the UK where those equivalent assets had not performed as strongly,” he said, adding that this meant the UK debt had more scope for upward moves.
USS had also had relatively little investment grade credit before the crisis, he said.
“We’ve seen that as an opportunity to buy repriced and cheaper assets that we think have a structurally strong place in our pension plan so we’ve used that as an opportunity as well,” Pilcher told the panel.