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.