Pension funds should invest in research, storytelling, and outreach strategies to demonstrate the broader social advantages they enable, according to a new report from International Centre for Pension Management (ICPM).
The report – Social infrastructure blueprint – A roadmap for pension funds – describes a framework for pension funds to strengthen their role in building social infrastructure while maintaining fiduciary integrity and financial sustainability.
As defined in the report, social infrastructure is not just about physical spaces like schools and hospitals but includes “intangible systems like trust and community networks that keep society healthy and connected”.
According to Gareth Gibbins and Sally Shen, Canadian pension specialists and lead authors of the report, “most pension funds have yet to fully recognise their potential as social infrastructure providers”.
And yet by operating without a social infrastructure framework, such pension funds “risk underinvesting in member well-being, failing to communicate their broader value to members and policymakers, and losing the trust and legitimacy that long-term institutional sustainability requires,” Gibbins and Shen write.
“At the same time,” they continue, “pension funds that pursue social initiatives without structure risk inconsistency, governance gaps, and exposure to the charge that social objectives are being pursued at the expense of fiduciary duty”.
According to the authors, the report should not be misunderstood as being about pension funds pursuing social goals alongside financial returns, rather that “pension funds already create social infrastructure by their very nature, efficiently converting human capital into future financial capital”.
Three steps
Developed by the ICPM social infrastructure working group, a collaboration of nearly 10 pension fund leaders from around the world, the “blueprint” has three steps.
The first and third – ‘Understand & Articulate’ and ‘Measure & Manage’ – are universally applicable, while the second – ‘Take Action’ – is context-specific, dependent on factors such as pension fund size, stakeholder composition, legal frameworks, and member demographics.
The first step, according to the blueprint report, is “fundamentally about conversation”.
“Without shared understanding and board-level commitment, efforts to expand into impact investing, extended member services, or member input and support risk being seen as peripheral activities rather than strategic priorities aligned with the pension fund’s core mission,” the report authors argue.
Investing in research, storytelling and outreach strategies to demonstrate the social value of pensions is how pension funds can “lead this conversation”, they write.
The second step in the blueprint is about the actions pension funds can take to further improve their social infrastructure. The ICPM working group organised these into three categories: impact investing, extended member services, and member engagement.
Three case studies in the report are intended to illustrate this step, one about ABP’s impact investments, another about Danish pension fund PFA’s development of comprehensive member services, and a third about Pensionfonds Detailhandel’s “mini-public” member engagement initiative.
Well-being valuation
The third step in the social infrastructure framework, meanwhile, is about measuring and reporting the social value created. According to the authors, social value metrics should appear alongside financial performance in board reporting, annual reports, and member communications.
A case study for this, according to the blueprint, is work done by think tank CANCEA with large public sector pension plans in Canada to apply well-being valuation methodology, translating member satisfaction information into monetary terms.
