Pensions Bill
The pensions bill will be the most significant regulatory development in UK pensions for many years, setting up the 'Personal Accounts' system to provide a pension to millions of people currently without one. This new super-fund is expected to encompass 10 million of the UK's workforce, making it the largest pension fund in the UK. FairPensions is working hard to ensure Responsible Investment is firmly on the agenda for Personal Accounts. Once the Personal Accounts system has been set up in 2012 it will quickly grow into a multi-billion pound fund - one that could have significant clout in making sure that corporations behave conscientiously.
November 10, 2006 by Kriz Dux. London - House of Parliament
The Bill went to its third reading on 22nd April 2008, and as a result of our efforts both the Conservatives and Liberal Democrats tabled amendments proposing that the Personal Accounts should be obliged to sign up to United Nations Principles for Responsible Investment, a matter which was discussed at committee stage but not included in the Bill.
FairPensions will continue to lobby for a formal commitment that this new, important pension fund will be responsibly invested.
Why does FairPensions want the new 'Personal Accounts' Pension Scheme to adopt Responsible Investment?
Personal Accounts will grow into a massive fund that holds shares in the largest multinational companies operating both in the UK and overseas. As a major shareholder, the Personal Accounts scheme can tell these companies to deal with issues like climate change, human rights abuses and governance issues (like those that brought down Enron).
Adopting Responsible Investment will have a positive impact on more than corporate behaviour. There's a growing body of research (link to article) that shows how an engaging with companies that you hold shares in can improve investment returns, by making sure that risks to investments caused by environmental, social or governance issues (ESG) are addressed. High profile investors are now taking action when they have concerns about ESG risk to their investments. Lothian pension fund is suing BP for the damage to its investment after an oil spill, which it said was caused by BP's negligence. The Rockefeller family, major shareholders and descendants of the company's founder, publicly challenged Exxon over its attitude to climate change, saying that it was failing to plan for the long term in a way which threatened the company. They also linked this issue to a governance one, indicating that the lack of independent board members who would bring a different perspective from the "company line" had exacerbated the problem.
What are the United Nations Principles for Responsible Investment?
UN PRI is a best-practice industry-led framework to ensure that environmental, social and governance risks are considered in investment decision making. Signatories formally recognise that although financial returns are the most important thing when investing, but these cannot be considered independently of their social and environmental surroundings. They recognise that the beneficiaries of investments have concerns other than financial considerations, and that taking these into account can improve investment decision-making. UN PRI is a voluntary and aspirational framework, which suggests but does not prescribe methods for incorporating ESG consideration in investment decision-making. It also acts as a collaboration for signatories to work together on Responsible Investment issues, and to share the knowledge they build up.
Find out more about the UN PRI at http://www.unpri.org/