Report comment

Susanna Rust is quite right. Managing any risk is not the same as doing something about it. Most risks are actually a given. They don't go away. You can just shove them in someone else's lap, sell them or do what you can to mitigate the risk. In the case of ESG something can be done about the risk. However, while that is a good, positive by-product of management, it is emphatically not the job of pension funds to protect or even change the environment. Their job is to make pensions. At best, there is an investment case for acting on bad governance or it least divesting from badly led enterprises.

The only scenario I can think of (but it is realistic and compelling) that would spur a pension fund into ESG action without a financial reward is one where its beneficiaries want their pension fund to be active with their money on their behalf. Acting on their wishes will reinforce trust. Trust is what any financial institution needs to survive.

Since pension funds' beneficiaries are not a random population, their interests will vary wildly. Doctors and nurses will hate tobacco and motorcycles but like medicine and children. The religiously motivated will like the environment at large, but not alcohol and guns. Soldiers will like landmines, guns and anything that keeps the peace.