The leaders of the world’s two largest corporate and investor sustainability initiatives today called on CEOs to ensure their corporate pension plans – an untapped sustainability area – adopt responsible investing policies – highlighting concrete benefits including improved investment performance, fulfilling fiduciary duty and managing regulatory risk and boosting corporate sponsor credibility.
According to a guide released today by the UN-supported Principles for Responsible Investment (PRI) and UN Global Compact, CEOs should ensure plans mirror their own sustainability values.
Aligning Values: Why corporate pension plans should mirror their sponsors includes case study examples from major corporate pension plans showing how companies have taken steps to make their plans sustainable. It also gives five steps a CEO could take to ensure their plan invests responsibly, such as signing up to the PRI.
The guide aims to mobilise an important investment sector that has remained largely dormant in terms of advances in sustainability practices. In the US alone private-sector Defined Benefit plans held USD $2.9 trillion assets at the end of 2016. The global industry is estimated at many trillions of dollars.
“While significant numbers of institutional investors and corporations are now integrating environmental, social and governance factors, corporate pension plans remain a sleeping giant”, said Lise Kingo, Chief Executive Officer and Executive Director, UN Global Compact and Fiona Reynolds, Managing Director, PRI. “And when we consider the capital that will be needed to achieve the Sustainable Development Goals, the multi-trillion-dollar corporate pension industry needs to be activated to join other actors in private finance that have aligned to the 2030 Agenda”.
Kingo and Reynolds noted that of the 1,700-plus signatories to the PRI, less than 50 are corporate plans.
In an effort to address this imbalance, Kingo today called on the CEOs of corporate signatories of the UN Global Compact, in their role as sponsors, to encourage their associated corporate pension schemes to adopt the PRI principles, recognising that pension scheme decision making is independent of a plan’s sponsor.
“We strongly believe that corporate plans need to align with their sponsors’ sustainability philosophy”, said Kingo, “otherwise, investment decisions will be out of step and could actually be undermining the stated aims of the sponsoring corporation’s strategy”.
Reynolds added: “The evidence and proof now abounds: adopting responsible investing practices is not only consistent with fiduciary duty, it unlocks financial and social capital over the long term. Failing to address ESG and sustainability factors poses material risks to any pension plan”.
