Ministerial stamp of approval for responsible investment
After hours of debates and hundreds of amendments, the Pensions Act 2008 made its way onto the statute book this week. During the discussions Ministers made it clearer than ever that they see responsible investment and engagement as being perfectly in line with pension trustees’ legal duties:
“There is no reason in law why, in making investment decisions, trustees cannot consider social, ethical and environmental considerations, including sustainability, in addition to their usual criteria of financial returns, security and diversification. It follows from this that it may be appropriate for trustees to engage in these considerations with companies in which they invest.” – Lord McKenzie
Of course, many trustees know that the excellent report by lawyers Freshfields made this case a few years ago, but we now have it on the record from Ministers. The consensus will be welcomed by members and trustees on all sorts of schemes who believe that responsible ownership – including building social, environmental and corporate governance issues into decision making and engaging with the companies they invest in – is the best way to manage members’ money.
Responsibility for the investment of the new Personal Accounts scheme ushered in by the Pensions Act will sit squarely with the trustees of the scheme – surely they will think long and hard about developing a real responsible, engaged investment strategy for the fund.