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The UK’s leading pensions body launched a guide to responsible investment to encourage its members, who control £900 billion of assets, to create an investment climate where consideration of ‘extra-financial factors’ is the norm.
David Paterson, Head of Corporate Governance, NAPF, said: “There is clear evidence that extra-financial factors can have a big impact on a company’s long-term value, reputation and growth. Successfully bringing these factors into investment decisions can help moderate risk and improve returns. The Stewardship Code has helped raise awareness of the need for good governance, and that agenda should be widened to include environmental and social matters. While interest in responsible investment has grown in recent years, we still have some way to go before it could be said to be fully mainstream.“
“There is a lot that pension funds can do to help make responsible investment the norm, and we hope that our members will follow the guidelines we have set out. They should develop clear policies that reflect ESG factors in decision-making, and exercise stewardship responsibilities such as engagement and voting. It is vital to select investment managers that act as responsible investors and report clearly, and to then hold them to account.”
The guide highlights that fixed income represents a growing share of most pension fund portfolios, and that responsible investment considerations are as relevant to fixed income investment decisions as they are to equity investments. The guide also charts the development of responsible investment and clarifies how it fits in with pension funds’ fiduciary duty. It explores a number of real-world examples to make the case for an increased focus on extra-financial factors when making investment decisions.