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Impact Investing

IPE special report May 2018


UK funds fail to embrace ethical investing

UK- A new report suggests UK pension funds continue to shun ethical investing despite an amendment to the 1995 Pensions Act two years ago designed to make them take social and environmental issues more seriously.

A lax approach to socially responsible investment is the norm according to the report by JustPensions, a monitoring group sponsored by UK charities.

JustPensions surveyed some of the UK’s largest funds that, between then, account for assets of £170bn. Those surveyed include, among others, schemes at BP, Shell, HSBC, Hermes and GlaxoSmithKline.

The findings appear to contradict a surge of reported interest in the asset class. Recently, numerous investment managers have recruited specialist SRI teams and there have been a series of initiatives including the decision by index provider FTSE to introduce ethical indices.

JustPensions says that among the schemes it surveyed, there is more progress on policies that action and that this disparity leaves the funds open to criticism.

One of the problems with the 2000 amendment to the Pensions Act is that it merely requires funds to change their statement of investment principles (SIPs) to include their approach to social and ethical issues.

Some funds have suggested ethical elements have little or no bearing on their approach to investment while those that make commitments in their SIPs admit they, or their investment managers, lack the resources to implement an ethical dimension.

David Coles, co-author of the report, says that through a lack of attention to ethical investment, “the reputations of both the employing company or organisations and of the trustees individually are at risk.”

And, he warns: “unless pension funds take urgent steps to improve their implementation of socially responsible investment strategies, the case for regulatory action by government will only increase.”

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