Just an aside
This week's article about the Northern Ireland Local Government Officers' Superannuation Committee focuses on lowering risk, but also delves into the environmental, social and governance factors that played a role in Nilgosc's decision-making.
However, the frustrating conclusion is that most investors will only "give a nod to ESG".
While pension funds are quick to send out statements about voting against the Sports Direct board, they are less willing to sacrifice returns gained through major oil companies, for example.
Speaking to industry figures for my feature on emerging market debt, the question of how to reconcile ESG factors and emerging market investment also cropped up.
One interviewee said it is just one of many variables their consultancy looks at when selecting managers. My overwhelming impression was that the issue is not discussed.
Celene Lee, principal at Xerox HR Services, made the valid point that human rights breaches, for example, are not the preserve of the emerging world. She cited a client who felt uneasy about investing in China because of capital punishment, only to then remember that the death sentence also exists in the US, where of course the fund was already invested.
The ‘goodies’ and the ‘baddies’ are not easily separated, with western powers and companies involved in the politics and economies of other countries; the many sources of climate change; and, shockingly, the continuing existence of slavery in developed as well as emerging countries.
Illustration by Ben Jennings
Hermes Investment Management’s head of emerging markets Gary Greenberg recently asked if morality can co-exist with investment, which is primarily interested in the bottom line. He concluded that to make the planet a better place, professional investors need to connect with their sense of responsibility as human beings, rather than splitting into two identities.
BlackRock’s call for greater efforts from investors to tackle climate change also gives me hope that the mood is changing.
The world is messy, but it might still be useful for investors to draw up or adopt a list of principles, and ensure their asset managers use them. Having some sort of moral compass that can guide pension fund money to investments less damaging to all of us might also require widening the definition of ‘members’ interests’.
Sandra Wolf is editor at Pensions Expert. You can follow her on Twitter @SandraCWK and the team @pensions_expert.