The UK Sustainable Investment and Finance association says pension funds can drive change but companies are the strongest link in the broken investment chain.
The Government’s Kay Review closes this Friday (18/11/11) and UKSIF is today calling on pension funds, investors and companies to embrace a long-term approach. UKSIF is the UK’s trade body for sustainable finance whose members include the Co-operative, Aviva and many other major financial institutions.
Economist John Kay is investigating whether UK stock markets push companies into taking a short-term approach to business. UKSIF has welcomed the Review and publicly called for all parts of the investment chain to use the publication of Kay’s report next year as an opportunity to rebuild public trust in UK equity markets.
As part of their submission, UKSIF has released a diagram of the investment chain that includes a list of its recommendations. This is published under a ‘creative commons’ license so is available free for any publication to use.
Penny Shepherd MBE, Chief Executive of UKSIF said:
“In our submission, we call for everyone – asset owners, the investment industry, companies, regulators and civil society – to play their part in restoring UK equity markets to their proper role as the most effective way to allocate capital for long-term wealth creation. This is urgently needed by companies, savers and society as a whole.
“Pension funds and other asset owners must drive change by incentivising their managers to act in a long-term way and by embracing best practice on transparency. That includes publicly disclosing not only their responsible investment policies but also how they are implemented.
“We are already seeing examples of brilliant practice from leading corporate and public sector pension funds but many more need to follow their example.
“All actors in the chain can improve the way the markets behave from individual pension beneficiaries demanding more information from their pension trustees, to the Chief Investment Officers who allocate billions of capital to companies lacking clear strategies to protect value in the face of pressing environmental, social or governance issues.
“But it is companies that are perhaps the strongest link in the chain. Firstly, many companies should do more to encourage their pension funds to be long-term responsible investors. Too many major companies which recognise the importance of sustainability in their business strategies do not help their corporate pension schemes to appreciate the challenges ahead. Secondly, we need more companies to disclose clearly their strategies and key metrics for addressing the threats to business models in a world of resource constraints and social pressures. If companies do not assess and report effectively on how they will address ESG risks and opportunities, how can the market assess their potential for sustained success over the long-term?”
Source : UKSIF Press Release
