I write extensively on social purpose and my desire that pension schemes should be a force for societal good. It is right and proper for Government to call for evidence that pension schemes (whether Governed by Trust or established as personal contracts).
I see market practice and it is changing. I have written this article to explain that it is now in the commercial interests of those managing pensions (whether for profit or not) to explicitly promote the social purpose of the pension’s investments as part of its statement of investment principles, in its marketing literature but most importantly in its investment strategy.
Paying attention to matters of social importance means taking direct action on matters such as stewardship and can lead to tilts and even exclusions of stocks that might previously have been included in portfolios.
We know that companies that seek to minimise harm and maximise their contribution to society, prosper in the long-term and pensions are long-term investments. Thankyou to the DWP for running this call for evidence, that brings these matters to the public eye.
I see scepticism and some cynicism as to whether the risks associated with bad practice harm member outcomes. I am an ex-smoker, worked for a time in a company owned by BAT and own shares in that company as a result. I vote those shares and hope that BAT is a better company for my stewardship. But my vote – like this response to the consultation – reflects only a tiny fraction of the story.
The great social issues of our day, racism, exploitation of women and children, inequalities of opportunity and access to healthcare all impact on the investments we make through our pension plans. Some of us are lucky enough to have defined pensions being paid or awaiting payment and these are often backed by assets managed by trustees, I am interested in how these assets are managed and more so, because I am taught that I can influence behaviours of investment managers by writing to my trustees and asking them to pay attention to the social purpose of their investment strategy.
Finally, I will make a comment on my own pension pot which I invested in the L&G Future World fund in 2017. Since I made this investment, I have tracked how my pension pot has grown relative to my leaving it in a fund that tracked the same markets without interventions. I have paid more for my investment management, but I have benefited from better performance and am considerably richer for the switch. Of course, I might not have fared so well, and I may lose in the future, but in having a clear insight into the value I get for my money, I have become much more engaged with my pension and – as a result – get much more satisfaction from it.
There is clear utility for me – in investing for social good. Knowing that my investments are managed with social purpose adds to my personal happiness.