Archived press release

Top Pension Funds Must Raise Their Game

5 August 2001

Pension fund trustees must dramatically “raise their game” if they are to meet investor concerns about ethical investment. That's the conclusion of a new survey of the country's top 100 occupational pension funds conducted by Friends of the Earth (briefing available). The survey is to be published a year after the amendment to the Pension Act, which required trustees of occupational schemes to disclose through their Statement of Investment Principles (SIPS) the extent to which social, environment or ethical considerations are taken into account in investment decisions.

FOE's survey shows that most funds now include socially responsible investment in their investment strategy. But many still put few or no obligations on fund managers to engage actively with the firms in which they invest to ensure ethical standards. And most still have no means for monitoring whether trustees and fund managers are meeting their stated ethical policies.

The funds with the best record on ethical investment include major investors such as British Telecommunications PLC pension fund, and the University Superannuation Scheme Ltd (the first and third largest funds in the country in terms of capital value). However local authority funds including East Riding of Yorkshire fund, Merseyside Pension Fund, Nottinghamshire County Council fund dominate the top group.

The worst performers include the Pilkington PLC pension fund, Marks and Spencer plc pension fund and the Rover Group Ltd pension fund who failed to adopt any ethical investment principles. A number of large funds, predominately corporations, either refused to co-operate with the survey or did not respond including the Ford Motor Company, Sainsbury, Barclays Bank, Abbey National and Rolls Royce.

FOE wants all pension funds to introduce:

• better implementation mechanisms, including the use of appropriate sanctions, to ensure that ethical objectives are actually put into effect
• more explicit policies on engagement with companies in which the fund invests to ensure they are able to maximise their influence over corporate behaviour
• better disclosure of trustees policies on socially responsible investment
• significantly more resources for research, monitoring and engagement, and
• to establish ongoing consultation processes with members to ensure their needs are reflected by the fund

Simon McRae, Investment Campaigner at Friends of the Earth commented:

“The good news is that most pension funds in the top 100 have investment strategies that include social, environmental and ethical considerations. The bad news is that most don't have the systems or resources in place to ensure that their fine words are actually carried out in practice.

Polls show that nearly three quarters of UK pension holders want their pensions to be used to help corporations to be socially responsible. Most people do not want their security in retirement to be achieved at other people's expense. The pensions industry cannot afford to ignore this consumer demand. But our survey shows that funds still need to raise their game if they are to keep the customers satisfied.”

NOTES TO EDITORS:

[1] Following the changes to the Pensions Act in 2001 Friends of the Earth(FOE) surveyed the largest 100 occupational pension funds in the UK based on their adoption of ethical investment criteria. The funds were then benchmarked on the basis of the ethical considerations contained in their SIPs as well as any evidence of monitoring and engagement mechanisms used by trustees and fund managers to carry out these responsibilities.

[2] Details of the survey including methodology, key findings and the full table of benchmarked funds are available from FOE on 020 74901555 and will be published on our website - www.foe.co.uk.

[3] On the 3rd July 2000, a new amendment to the Pension Act 1995 came into force requiring the Trustees of occupational pension schemes to disclose through their Statement of Investment Principles (SIPs) "the extent (if at all) to which social,environmental or ethical considerations are taken into account in the selection, retention and realisation of investments".

To view PDF files you will need to download Adobe Acrobat Reader. Visually impaired users can get extra help with these documents from access.adobe.com.

If you're a journalist looking for press information please contact the Friends of the Earth media team on 020 7566 1649.

Published by Friends of the Earth Trust