In the past few days the Paris Treaty has been ratified. One man, Donald Trump, has threatened to put the short term interests of his country above the longer term interests of the globe. Neither we nor his citizens will thank him for this in years to come.
Last Monday, HSBC made a powerful statement of future intent by switching its equity default fund from a standard managed fund to the Legal and General Future World Index Fund.
It is the first time Trustees of a major DC fund have taken a step. Focus group research had suggested that on average , members of the fund had been prepared to lose on average 3% of their overall return to have their money managed on a sustainable basis. 81% of members asked said they would prefer to have their money managed with sustainability in mind.
You can read the press presentation given by LGIM and HSBC to announce the fund here.
I feel strongly about this and am meeting with LGIM to discuss moving my own money to this fund. My decision will be based on the usual factors in choosing where to invest, the investment drag from costs of the fund, the volatility of the investment and the return I can expect for the risks I am taking. I am now having to factor in the suitability of this fund for someone who wishes to take withdrawals of the fund when I need to supplement my income.
I will also be meeting HSBC’s CIO later in the week to find out how he has presented this fund to members of his DC scheme. Although 81% were in favour, 10% disagreed with the move with a hard core of 3% strongly disagreeing, I want to know how these groups were satisfied – and I want to know about the 9% who presumably didn’t know what to think!
I admire HSBC, their trustees and their CIO for taking this move. I admire LGIM for investing in sustainability and championing it. Most of all, I am pleased that two major financial institutions are showing conviction (albeit with other people’s money). LGIM are seeding this fund with their own capital, a mark of a wider acceptance of the concept at HSBC is when the principals behind this fund are fully incorporated into the DB strategy. Perhaps I will hear more about this over the week.
I am of course more than a one man pension arrangement, I am part of a group personal pension with more than 300 people in it, the question I am asking my colleagues, is whether we should be offering this fund- either as part of our default strategy or as an alternative.
And I will be trying to understand from LGIM, to what extent the election of Donald Trump is likely to impact the Climate Change agenda and whether his impending presidency presents additional risk or opportunity to the fund’s performance.