A study of the new Statements of Investment Principles of the top 500 UK occupational pension funds and local authority pension funds [1], published today by the UK Social Investment Forum [2], reveals that 48% of the funds surveyed want their fund manager to take account of financial implications of ethical, social and environmental issues. These funds represent 69% of the assets of those responding to the survey.
This survey is the most comprehensive to date looking at the response of pension funds to the new regulation which came into force on 3 July 2000 [3], with responses from 171 funds representing £302 billion total assets. This regulation requires occupational pension funds to declare the degree to which, if any, they take account of social responsibility issues in their investment strategies.
In total, 59% of funds (representing 78% of assets) currently incorporate socially responsible investment into their investment strategies either by engagement or by specific request to the fund manager, and local authority pension funds form the majority of the 11% of pension funds that incorporate SRI in their strategies by engaging directly with companies.
The survey actually revealed a clear difference in strategy between company pension funds and local authority funds. Company pension funds tend to delegate implementation of any SRI policy to their fund manager, whereas local authorities tend to retain ownership of their SRI policy and favour engagement, not necessarily via the fund manager. Nearly three quarters of local authorities mentioned engagement compared to a quarter of companies.
Penny Shepherd MBE, Executive Director of the UK Social Investment Forum, said:
"Our findings clearly demonstrate that the UK’s major pension funds are concerned about the implications of social, ethical and environmental issues. The fund management industry must now respond. Fund managers need to develop greater expertise in assessing companies’ social and environmental performance."
Eugenie Mathieu who carried out the research said:
"The 34% response rate to this survey demonstrates an impressive openness and transparency by major occupational pension funds, and a recognition of the growing importance of corporate social responsibility issues."
* Overall, 59% of occupational pension funds, representing 78% of assets, incorporate socially responsible investment (SRI) into their investment strategies either by engagement or by specific request to the fund manager.
* Only 14% of funds state specifically that concerns about social responsibility will not be taken into account and these represent a mere 4% of total assets; The remaining 27% of funds leave the decision to the fund manager
* Larger pension funds are more likely to take socially responsible investment considerations into account than smaller ones.
* 71% of local authority pension funds mention "engagement" in their statements of investment principles compared with only 23% of company pension funds.
