Proposals to make company pension schemes publish details of how they have taken members' ethical views into account when investing their money have been scrapped by the Department for Work and Pensions (DWP). Instead, the department said this week that it will require schemes to publish more detail on the principles they apply when making investment decisions. The announcement has disappointed ethical-investment campaigners and trade unions, who had hoped pension schemes would come under more pressure to invest in line with members' views.
There have been a string of high-profile rows over schemes with holdings in areas such as tobacco and oil investments that many savers oppose. However, pension experts point out that under the new rules it will still be possible for pension-scheme members to lobby their funds to invest more ethically. A scheme's official statement of investment principles will have to disclose the approach taken. That will let members know whether any ethical principles are included in the scheme's policies.
If they are unhappy with the approach, they will be able to pressure the scheme managers to change tack. Many unions are keen to work with groups of employees in this way. Growing numbers of schemes also offer members an ethical investment option, such as one or more explicitly environmental or sustainable funds. However, the broader law on pension-fund investment remains unclear. Schemes are generally obliged to make decisions on the basis of the financial interests of their staff, rather than other considerations. So the extent to which managers can apply ethical principles will often be limited.
David Prosser is a regular Money Week columnist, writing on small business and entrepreneurship, as well as pensions and other forms of tax-efficient savings and investments.
David has been a financial journalist for almost 30 years, specialising initially in personal finance, and then in broader business coverage. He has worked for national newspaper groups including The Financial Times, The Guardian and Observer, Express Newspapers and, most recently, The Independent, where he served for more than three years as business editor. He has won a number of awards, including the Harold Wincott Personal Finance Journalist of the Year, the Headline Money Journalist of the Year and the BIBA Journalist of the Year. He has also been a frequent contributor to broadcast news, providing expert advice and punditry on radio and television.
For the past ten years, David has worked as a freelance journalist, writing for a broad range of newspapers, magazines and online publications. He also writes a regular column for Forbes, and is a frequent contributor to both specialist and consumer publications.
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