Ownership Day – encouraging investors to be part of the solution

Last week the UK Sustainable Investment and Finance association (UKSIF) held its second annual ‘Ownership Day’.

The day involved a range of activities including a parliamentary reception.  The occasion was aimed squarely at  encouraging asset owners to give greater consideration to how better integration of Environmental, Social and Governance issues into their investment work can help improve investment returns.

UKSIF’s goal was to  encourage major investors – in particular pension schemes –  to think through how they can behave more like asset owners (as opposed to short term traders of investors) and so use their share ownership rights to help improve  returns.

UKSIF and its members want asset owners to think more closely about ESG (Environmental, Social and Governance) issues as these are increasingly shaping investment returns.

Indeed their view is that without constructuve support from investors progress in these areas is likely to be slower than it would otherwise be – an undesirable outcome particularly in light of today’s  UN climate change report which illustrates precisely why this matters to investors (as well as everyone and everything else).

UKSIF’s three main  Ownership Day 2014 policy asks – from their website  are:

1)      A requirement by The Pensions Regulator (TPR) and other relevant regulators that all large listed and private UK firms report, on a ‘comply or explain’ basis, how their defined contribution (DC) corporate pension plans integrate environmental, social and governance (ESG) factors. This information should be provided in a clear, accessible and easily-available manner on topics including: whether a company’s pension fund has signed up to the Stewardship Code, to what extent their pension funds integrate a particular ESG investment approach or whether they offer a sustainable pension fund option.

2)    All public sector pension funds to be required to sign up individually to the Stewardship Code.  It is up to our elected representatives and the public sector generally to lead by example when it comes to good stewardship and other responsible investment practices particularly as it is their responsibility to spend – and get the most out of – taxpayers’ money.

3)      Clarification of the legal concept of fiduciary duty to improve investment outcomes through encouraging best practice sustainable investment and stewardship approaches by asset owners. The current interpretation of fiduciary duties of trustees to their beneficiaries is often that ESG issues should not be considered.  The current laws should be clarified to encourage ESG investment by asset owners and their intermediaries, including investment managers and consultants.