On the Record: How important is a pension fund’s reputation?
A long-term focus on quality
For pension funds like ÄVWL, reputation is one of its highest values, if not the highest. This is because the quality of the ‘products’ offered only becomes apparent at the end of a life-long customer relationship.
From the beginning of each of our investment decision processes, we see a close link between risk and return on one hand, and reputation and ESG issues on the other. The investment committee considers possible reputation issues that may arise from investing in certain businesses, countries or business practices. When we are in doubt, the investment is rejected. Admittedly, this is not always an easy task and it is hardly possible to always safeguard all interests.
ÄVWL is governed by its members, the physicians in the region of Westphalia-Lippe. Medical representatives in the self-governing bodies maintain a close relationship with the members and a frank exchange of thoughts. This allows a direct feedback loop with respect to the ÄVWL’s perception by external stakeholders.
We do not weigh reputation with external stakeholders against reputation with the pension fund’s members in terms of importance. It is important that members can rely on a sustainable and adequate retirement payment even decades in the future. It is also important to be recognised by business partners as a reputable and fast-acting investor with long-term interests. ÄVWL strives to be seen as a credible, reliable, trustworthy and responsible partner in pension provision as well as in capital investment.
In the course of the past 10 years, reaching our target return requires investing in more diverse, more complex and innovative assets. This includes globally diversified projects that carry a certain exposure to reputational risks. Reputation is increasingly important since the variety of non-governmental organisations (NGOs) and their objectives is becoming more diverse than ever.
Active means responsible
In today’s society, growing emphasis is placed on corporate image and brand. There is also a greater demand for responsibility. We see that responsibility strengthens our reputation, supports our business and allows us to distinguish ourselves. That is why it is directly linked to our strategy.
We are known as a forerunner in responsible investment. As a result of our long-term active approach, we have gained a reputation as a respected investor; this means we can access good investment opportunities and we are able to influence the terms of investments.
We regularly monitor our reputation among our clients, the media as well as the general public. Our strengths in terms of reputation include responsibility, strong finances, capable leadership, and being an attractive employer. Transparency and open communication are the key tools to build and communicate our reputation.
We consider several stakeholder groups important. Our clients form our key stakeholder group. As an active owner, we also consider the companies we have invested in in Finland and abroad as well as our investment partners as important stakeholders. Responsibility is an integral part of everything we do. We want to be seen as responsible actor but also as an innovator.
We have always understood the importance of reputation, and have adopted a more proactive and systematic approach in managing it.
Working hard to maintain trust
We are a social, non-profit organisation and as such, we appreciate the trust and loyalty of our members.
Our board has to take into account our reputation as of one the aspects that can be affected by its decision-making process.
We invest in our contact with representatives of employees and employers through regular meetings. To this purpose, we run eight sector committees that convene several times a year. We also organise a yearly meeting to discuss current affairs and developments within the pension sector and pension fund. We research our stakeholders’ views and monitor the satisfaction of our participants. We meet yearly with a panel of our participants.
Our participants are always our main concern. But our reputation with other stakeholders – for example government representatives, members of parliament, representatives of branch organisations or the media – is also important. This subject is one of my responsibilities as a board member.
We want to be seen as an organisation that provides support and guidance to its participants, employers and their representatives.
Confidence in pensions in general has fallen and pension funds are trying hard to restore it. We think transparency, accountability and clear information are important to maintain trust.
Interviews by Carlo Svaluto Moreolo