UK pension funds to look at social impact investment

Five local government pension funds are considering investments that can provide both financial returns and positive impacts for society and the environment.

Those that have pledged to take part in the initiative are the Greater Manchester, West Yorkshire, West Midlands, South Yorkshire and Merseyside pension funds.

The group of five published an expression of interest advert in the Financial Times recently, stating that they were looking for opportunities that satisfy both financial and societal needs.

Councillor Kieran Quinn, chair of Greater Manchester Pension Fund, said, “A pension fund has an overriding responsibility to make a financial return that will assist it in meeting its pension liabilities without taking unreasonable risks, but it is clear that in meeting these criteria there are investment opportunities that will also deliver an impact on local communities that improves their economic wellbeing, including social and environmental outcomes.”

There are many sectors in which the funds can invest to create a positive impact, such as infrastructure, resource management and business development. The funds have agreed to set an initial investment of £50m

Quinn added, “Funds have taken a number of such investment opportunities and this initiative is not only to establish the depth and breadth of the current market, but to challenge asset managers to bring opportunities forward on sufficient scale to match the investment allocations pension funds are prepared to commit.”

Local government pension funds have come under scrutiny in the past over their investment in tobacco – which they undertake despite fighting smoking addiction. Croydon councillor Dudley Mead, who chairs the council’s pensions committee, told Your Local Guardian in April that he would “absolutely not” change the investment policy and that his duty was “to get the best possible return” for investors.

This week, the National Association of Pension Funds (NAPF) launched a guide that promotes responsible investment, encouraging members to take factors other than economic returns into account when investing.

Further reading:

Pension fund trade body launches responsible investment guide

Amnesty International challenges pension fund over investment in lethal drug

Councils are still investing in tobacco while fighting smoking addiction

Pensions committee can go further by encouraging sustainable investment, says UKSIF

The Guide to Sustainable Investment 2013