Strathclyde joins antibiotics campaign as investors up engagement

Pension funds are increasingly taking active ownership of their investments, engaging with underlying companies on issues such as climate change and corporate governance to encourage change and, in the long term, greater investment growth.

There is a recognition that investment isn’t just about stockpicking, there’s an important role in terms of engaging and stewarding companies once you’ve invested in them as well

Luke Hildyard, PLSA

Fairr initiative

The investors, which hold more than £1tn of assets, are part of an initiative called Farm Animal Investment Risk and Return, which is engaging with 10 of the largest restaurant chains in the UK and US to end the non-therapeutic use of antibiotics in meat and poultry supply chains.

Strathclyde joined the group in October last year.

A spokesperson for Strathclyde Pension Fund said: “Animal factory farming is becoming a high-risk sector for investors for a number of reasons – including emissions, sustainable use of resources, food safety and threats to human health.”

He added: “Officers are working with the fund’s investment managers and its specialist responsible investment advisers to collaborate with other investors and push for greater transparency on farm animal welfare wherever we invest.”

Jeremy Coller, founder of the Fairr initiative, said: “While issues like climate change or health and safety get strong attention, ESG issues such as the systemic overuse of antibiotics on factory farms are often forgotten – and that’s a dangerous disconnection, as the health risks are very significant.”

He added: “Regulation on antibiotic overuse is set to tighten and consumer preferences are shifting away from factory-farmed food. So it’s only right that investors know whether the 10 food service companies engaged by this coalition are ready for change.”

Proactive shareholders

The move comes amid increasing efforts from pension funds to be active shareholders; last month a lawsuit was filed against motor giant Volkswagen on behalf of 278 institutional investors, looking to recover losses of €3.2bn (£2.6bn).

“There is a recognition that investment isn’t just about stockpicking, there’s an important role in terms of engaging and stewarding companies once you’ve invested in them as well,” said Luke Hildyard, policy lead for stewardship and corporate governance at the Pensions and Lifetime Savings Association.

The PLSA’s most recent stewardship survey, released in November last year, showed 98 per cent of respondents agreed pension funds have stewardship responsibilities, and 93 per cent said environmental, social and governance factors are material to investment returns.

Despite this, policies and practices showed a drop-off in enthusiasm, with 73 per cent including stewardship in their statement of investment principles and just 37 per cent regularly discussing it at trustee meetings.

Hildyard added: “Trade unions and campaign groups are starting to see pension funds as a vehicle for their campaigns and seeking to get their members to use their pension fund as a form of leverage, which I think is going to grow as a campaign tactic.”

Fergus Moffat, head of public policy at sustainable investment trade body UKSIF, said engagement was on the rise among pension schemes.

“We do see letters being written more often,” he said. “We’ve seen that kind of more proactive engagement moving on slightly more than it had been.”

However, Roger Mattingly, director at professional trustee company Pan Trustees, said while there was increased engagement activity, funds were not always being as “terrier-like” as they could be.

“I still get the impression that there’s an element of superficiality to it,” he said. “I’m not convinced the investment managers are going for the jugular on a lot of these things.”