Once again, the country’s leading pension funds have stood up for responsible investment, and pressure is building on asset managers to be more forthcoming in their reporting on the matter.
One drawback of this push is that it is always led by the largest institutional investors with the resources to do it, making it a rather top-heavy campaign – where are the peppy, smaller pension funds on this issue?
Still, the funds mentioned in this week’s story hold more than £200bn between them. That is enough of a tab for asset managers to take note, and if the progress is there, the more engaged smaller funds will be able to benefit from it.
I thought one of the quotes from BT Pension Scheme’s Daniel Ingram was telling. “We’re still trying to build a better understanding of how these types of longer-term factors are affecting performance and risk.”
Illustration by Ben Jennings
The axiom of responsible investment is that taking issues such as environmental and social impact as well as quality of governance into account benefits the investee companies over the long term and thus the investor. Such activity is not just a good in itself, proponents claim.
Ingram is right that we need better understanding of how these factors affect performance, and those data will be crucial to whether this activity strengthens and spreads to the smaller end of the market.
As forensic as a bazooka?
Last week saw the launch of a huge and entirely expected programme of quantitative easing from the European Central Bank, which will amount to €1.1tn (£850bn) of asset purchases by September 2016.
So much ink has been spilled on this decision, and though in the short term we have seen the desired effects of inflated stocks, a weaker euro and lower borrowing costs, the answer to whether it has met its key objective of reducing inflation is in the post.
For defined contribution schemes, equities marching on and volatility avoided is all to the good. But for defined benefit schemes, ever-low yields are a nightmare from which they cannot wake up.
Ian Smith is editor of Pensions Expert. You can follow him on Twitter @iankmsmith and the team @pensions_expert.
