Pension funds

1
Pension funds climate change

• Tom Powdrill, TUC

2
Agenda

• Our overall view
• What the TUC is doing
• General trustee attitudes
• Barriers to change
• Breaking the deadlock

3
Our view of investor responsibility

• Pension funds need to generate returns plain and
  simple
• These returns need to be sustainable we are in
  it for the long run
• Trustees are acting on behalf of beneficiaries
  we need to be conscious of externalities
• We cannot take a narrow view

4
The TUC a typical small pension fund

• Final salary
• Vague wording in the SIP about social
  responsibility and voting
• Everything delegated to the appointed fund
  manager
• CSR issues rarely featured
• No transparency

5
The TUC an untypical small pension fund

• Redrafted the SIP to reflect our actual views and
  industry best practice
• Use a voting agency to provide voting advice on
  CSR issues
• All voting decisions are publicly disclosed on
  the TUC website
• Fund has joined the EAI
• Still final salary!

6
How we got there

• Important for the TUCs values to be reflected in
  its actions
• Like-minded trustee board
• We were willing to be proactive and push for what
  we wanted
• It has to be recognised that pension funds like
  ours are rare

7
Wider activity

• Our own fund is very small but we seek to set an
  example
• Unions collectively have over 1bn
• Other TU funds such as Unison and TSSA developed
  own policies
• The Enhanced Analytics Initiative has generated
  international TU interest
• Links being made between TUSDAC and the
  investment community

8
General trustee attitudes

• In a survey 26 of trustees said effective
  environmental management would have a significant
  positive impact on the FTSE 100 over 5 years
• However most trustees do not see this as part of
  their day to day job
• Most are happy to delegate responsibility to the
  fund manager and take reporting at face value
• Climate change?

9
Trustees views

• Just Pensions trustee survey Jan 2004

10
Barriers to change

• Trustees are generally not engaged
• Until recently investment consultants would have
  struggled to advise clients
• There is little commercial pressure on fund
  managers to be active on CC so why do it?
• Lack of research
• BUT 78 of companies think CC is an issue for
  them (Investec survey)

11
Breaking the deadlock

• Leadership by the IIGCC and particularly pension
  fund members will make trustees more confident
• William Mercer has stated climate change is a
  fiduciary issue for trustees
• Trustee training can make a difference, but a lot
  to cope with
• Enhanced Analytics Initiatives provides
  commercial spur for better research