New research exposes lack of action on responsible investment
A new report from FairPensions launched today criticises the ten largest contract based pension providers in the UK for failing to provide well governed sustainable pensions.
The research suggests that most insurance companies fail to regularly monitor external fund managers on their stewardship of investee companies to ensure that they are well-governed, deliver sustainable returns for pension savers and meet good environmental, social and governance standards.
Louise Rouse, Director of Engagement at FairPensions, said: “The fallout from the Gulf of Mexico oil spill and the hacking scandal at News International expose the financial relevance of environmental, social and governance issues. Insurance companies’ apparent disregard for responsible investment should worry savers.”
Louise Rouse added that:
“Ultimately it is savers who suffer when a pension provider fails to monitor their asset managers. As millions of people enter the pensions market for the first time, they will want to know that their pension provider, whether trust-based or contract-based, is protecting their best interests and taking environmental, social and governance issues seriously.”
The companies surveyed included, Aegon, Aviva, Friends Life Group, Legal & General Group, Prudential, Scottish Life, Scottish Widows, Skandia Group, Standard Life and Zurich Insurance.
The reports key findings where as follows:
None of the companies surveyed publicly disclose more than the top ten holdings in their Socially Responsible Investment (SRI) funds on their retail website.
Only one of the insurance companies surveyed is a signatory to the UK Stewardship Code.
Monitoring of voting and engagement is restricted to internal asset managers. Only one insurance company who answered the survey requests reports from external asset managers on their voting records.
None of the companies who completed the survey requests reports from external managers on their engagement activity with companies.
Only Standard Life PLC makes any information on voting and engagement publicly available on its retail website.
Only one of the ten companies (AEGON) surveyed has a publicly disclosed responsible investment policy separate from the policy of its asset management arm.
Commenting on the lack of transparency of holdings in Socially Responsible Investment (SRI) funds, Louise Rouse says: “Give that consumers choose in invest in SRI funds specifically to ensure their investments reflect their ethical preferences, it is important that all holdings are disclosed to reassure customers that this is in fact the case. For example many people might be surprised at the inclusion of oil companies in their ‘green funds’.”
The report comes at a time when pension savers are still feeling the effects of the financial crisis on their savings and a wide acceptance that the stewardship activities of pension schemes are a key factor in reducing risk and adding value for savers.
The report calls on employers – many of whom are in the process of selecting a pension scheme for the start of auto-enrolment - to ask searching questions of pension providers about their responsible investment policies and oversight of asset managers.