Ethical Performance
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main pension funds give the nod to SRI principles

September 2001

Most of the UK’s largest pension funds now appear to have made some kind of commitment to socially responsible investment (SRI), according to a new survey.

A Friends of the Earth study of 68 of the UK’s largest 100 occupational pension funds by capital value showed that 59 – or nearly 90 per cent – referred to ethics or corporate social responsibility in their statement of investment principles.

FoE described this as an ‘encouraging response’ to the July 2000 pensions disclosure regulation. However it added that the survey also found 37 of the funds (54 per cent) made only ‘vague or ambiguous’ statements on SRI, and many funds ‘had few or no demonstrable accountability mechanisms for trustees to ensure that fund managers were actually taking SRI into account’.

Many also put ‘few or no obligations’ on fund managers to engage actively with companies in which they invest. Thirty-two of the funds contacted by the pressure group either refused to reveal their principles, or did not reply. The information was sought in the latter half of 2000 and in early 2001.

Of the 68 respondents, ten funds were judged to have strong statements on SRI, to have committed themselves to engage directly with companies and to have established mechanisms to monitor the success or otherwise of their engagement activity.

This group was dominated by local authority funds (see box), but also included the BT pension fund and the University Superannuation Scheme (USS), which are respectively the first and third largest in the UK. Those judged to be among the worst performers were the pension funds for employees of Pilkington, Marks & Spencer and the Rover Group.

According to FoE, the company pension funds from which information was not forthcoming at the time of the survey included those for employees of Abbey National, Barclays Bank, Ford Motor Company and Rolls Royce.

The findings are broadly in line with those of the UK Social Investment Forum survey published in October 2000 (EP6, 2000).

However, Uksif executive director Penny Shepherd said FoE’s findings reflected ‘anecdotal concerns about the degree to which fund managers are implementing the statements’. The FoE survey found that less than a third of the 68 respondent funds were able to show how they were monitoring and reporting back to trustees on social, ethical and environmental issues.


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