Society as a whole is generating negative impacts, which present systemic risks to the broader economy, in the form of carbon emissions, biodiversity loss, poor governance and inequality. Many pension schemes want to consider what actions they can take to reduce negative impacts arising from, and impacting on, their portfolio, and to search for positive impacts, which provide financial opportunity.
We have worked across the pensions industry – with pension schemes, investment consultants, asset managers, policy makers, lawyers and industry experts – to ‘debunk’ some common myths about impact investing and design practical resources that pension schemes can use to start taking action.
What have we done?
Impact Investing Principles for Pensions
We developed four guiding principles for pension schemes that give an accessible, practical insight into the opportunity presented by impact investing and the concrete steps trustees can take to pursue an impact investing strategy.
The Principles were designed and tested through consultation with people across the pensions industry, in partnership with Pensions for Purpose. They offer a good governance framework which tackles the investment process at every stage in the investment chain – from how pension schemes can put in place objectives and set an implementation framework, to how to hold investment consultants and managers to account, and how to report on what is being achieved through a balanced measurement framework. You can read the Principles here and find our more about how they can be applied in practice here.
Clarification of trustees’ fiduciary duty and impact investing
There are some common myths about the compatibility of impact investing with pension trustees’ fiduciary duty – the legal obligation on trustees to act in the best interest of the scheme’s members. Some people understand this duty to be synonymous with maximising short-term financial return, some people think that impact investing means you have to sacrifice a financial return.
We have produced a paper that explains how fiduciary duty and impact investing are compatible, written and attested by five leading law firms and reviewed by a number of other lawyers and experts. You can read the full paper here.
We have also produced a short explainer video debunking the most common myths about impact investing with the generous sponsorship of Barnett Waddingham.
What can you do?
You can commit to using the Impact Investing Four Good Governance Principles for Pension Schemes, share them with your peers and join our growing impact investing network.
Become an adopter
You can become an adopter if you are a pension scheme, an investment consultant or a fiduciary duty manager committed to taking forward our Impact Investing Principles for Pensions. Check out our adopters statement for pensions schemes here and for investment consultants and fiduciary duty managers here. You can also email us at [email protected]
Become a supporter
You can become a supporter of the Principles if you are an industry body or an organisation working with pensions and support our Principles. Get in touch with us.
Share your experience
We want to hear from you. Do you have any successes or challenges around impact investing which you would like to share with us? Could your experience be a case study? Email us at [email protected]