Pensions at Work: Socially Responsible Investment of Union-Based Pension Funds

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Ethical funds are hampered when competing against those funds that are free to invest in any company, and some have struggled in the past year, Hudson says.

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Solar panel and wind power manufacturers have done well recently. You are investing to make your future financially secure so you should strike a balance between principles and profit. Don't just examine where the fund invests - check how it has performed but remember, past performance is no guarantee of future returns. Once you've compiled your ethical portfolio you should monitor its progress regularly - and not just its performance, she adds.

If you shop in Tesco there is little point shunning the supermarket giant on ethical grounds when drawing up your investment portfolio, says Hudson.

Ten of the best ... ethical investment tips

There is one ethical fund that should please even hardline investors. This article contains affiliate links, which means we may earn a small commission if a reader clicks through and makes a purchase. All our journalism is independent and is in no way influenced by any advertiser or commercial initiative.

The links are powered by Skimlinks. By clicking on an affiliate link, you accept that Skimlinks cookies will be set. Consider what you mean by ethical There are scores of different ethical funds to choose from, all with slightly different criteria. The number of fund choices that you offer to members may be influenced by:.

See Appendix 1 for information about investment mapping and the definition of a default arrangement. You should ensure that you document the information appropriately so that you can use it to assess whether the performance of the fund s is in line with the objectives and continues to remain suitable for members.

The DC code sets out the circumstances when you must review your SIP, default strategy and performance of the default arrangement see the guide on communicating and reporting for more information. One of the circumstances is when there are significant changes to the demographic of the membership. What you decide is significant will be relative to the size and existing demographic of each scheme, but examples of significant demographical changes might be:.

However, you should keep an eye on changes in membership for example through your administration reports , and seek to carry out a full analysis at least every three years or without delay after any significant change in the demographic profile of the relevant members. You should regularly review the longer-term performance of individual funds against the fund benchmarks and the net outperformance targets. For example, the fund performance may be on or exceeding target in relation to members that are within ten years of their expected retirement date, but for members with 20 or more years until their expected retirement date the performance may be below target.

Other, more bespoke performance monitoring services are also available. Where the investment performance fails to meet the longer-term performance objective, you should seek to understand why. In addition, you should consider any organisational change at the investment manager firm, and regularly review whether the provider is likely to deliver their expected level of performance over the longer term.

You may wish to consider setting automatic review triggers based on the level of net performance of investment funds against their benchmarks or objectives. Any triggers need to be appropriate to the type of fund and its objective. For example, an index-tracking fund may merit triggers which are configured tightly around the index return, whereas an actively managed fund may merit triggers configured more loosely around its long-term performance objective. You are likely to find it helpful to build flexibility into the investment review and assessment of arrangements.

You should also consider whether a significant increase in asset scale could enable fee scale discounts to be achieved.

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You should also regularly review the performance of the self-select funds used by members against their performance objectives and against industry benchmarks where available. Again, it is important to consider the impact of the fund performance on different members or groups of members. The costs involved in changing funds can be significant. You should always consider the long-term nature of pension scheme investments and not take decisions based solely upon short-term performance.

Your review may take different forms, for example using manager or adviser reports, or meetings with the managers or advisers. The costs involved in transitioning investments to a different investment fund or manager can be very significant and you should consider these costs and the ways you can mitigate and manage them when making your investment decisions. In particular, you should bear in mind that the explicit visible costs in a transition can be far less than overall costs. You should seek to understand the transition options available and take appropriate advice.

Common mitigations against out-of-market risk and other transition costs include:. You should ensure that the transfer of investments and cash between the parties is reconciled after transition. Some charge controls see the guide on value for members do not apply to arrangements which contain third-party promises, or guarantees about the level of benefits members will receive.

You should assess whether any guarantees or other favourable treatment might be lost on transition and whether any penalties will be triggered. You should generally inform members in good time before any fund transfer so that they can switch to a different fund if they do not want their investments to be automatically moved to the new fund see Appendix 1 for information on investment mapping.

Most transitions will also result in a black-out period when members will be unable to view or alter their accounts and you should communicate this to members. However, member communications should not delay a transfer that needs to happen urgently to protect member investments, for example due to a risk of provider insolvency.

What happens when a pension fund runs out of money?

In those circumstances, you should send communications as soon as practicable after the transition. Establishing the level of protection that different scheme assets would have in the event of fraud, malfeasance or other adverse events is not a straightforward task. You may wish to include questions on asset security when tenders for new investments are issued, and seek contractual commitments from the provider to keep that information up to date. It is likely that you will need to take advice to establish the levels of cover, and you may also need to take professional advice on the overall extent of coverage the scheme has, and the level of risk that the scheme potentially remains exposed to.

It is this conclusion and any planned actions that we consider it is best practice for you to communicate to members. There are a range of ways that this could be communicated to members, for example in the annual benefit statement or other regular member communications, or in the annual report and accounts. Schemes being used for automatic enrolment must have at least one default arrangement. If your scheme has a diverse membership you might decide that more than one default arrangement is appropriate. Broadly speaking, the difference between the two definitions is that for the charge cap, it relates only to arrangements in schemes being used for automatic enrolment.

For governance standards the definition also includes schemes which are not being used for automatic enrolment. Some exceptions and exemptions apply, and you may need to take advice to establish which arrangements in your scheme meet the different definitions. When reading the guidance, trustees should note that whether the scheme is used for automatic enrolment purposes is not relevant in the context of requirements to comply with the governance standards, including the requirement to produce a SIP relating to default arrangements see the guide on communicating and reporting for more information about SIPs.

Some schemes have arrangements in place where mapping exercises take place, or have taken place in the past. The result of such exercises is that a member may now be investing in a fund that they have not chosen to invest in, even though they made a choice to invest in the original fund, which has now been mapped to a different fund. This may mean that the arrangement falls into the definition of a default arrangement which is subject to charge controls see the guide on value for members for information about the charge controls.

To establish whether this is the case, you will usually need to refer to information supplied to the member at the point they originally chose to invest, and any subsequent relevant information, to establish whether the member had signed up to a particular investment approach or to a particular fund.

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Examples of things you may wish to consider are:. This will assist in forming a view as to whether the member chose to invest in the new arrangement. Where it appears that the member did not choose to invest in the new arrangement, it should be treated as a default arrangement. Milestone for workplace pensions regulation as TPR launches new approach. Home Employers Managing a scheme Contributions and funding Reporting duties DB scheme funding and costs Retirement options for DC members Reviewing a scheme Communicating with your scheme members Stakeholder pensions Closing your scheme.

Automatic enrolment duties I'm an employer who has to provide a pension I'm an employer who doesn't have to provide a pension now Re-enrolment duties See your re-enrolment duties Next re-enrolment if you're re-enrolling again. Useful links Declaration or re-declaration of compliance Ongoing duties Increase of automatic enrolment contributions What happens if I don't comply? Find out your letter code. DC benefits management Maintaining contributions. Automatic enrolment guide for business advisers About automatic enrolment Duties for new employers Being a point of contact Checking who to enrol Working out your client's costs Checking records and payroll processes Choosing a pension scheme Assessing and enrolling staff Writing to your client's staff Knowing your client's ongoing duties Completing the declaration of compliance Re-enrolment Supporting resources.

DB benefits management Funding and investment Scheme governance and controls Keeping records Contributions Providing information to members Managing conflicts of interest Corporate transactions and changes Scheme governance: Mixed benefit scheme management. Setting up a scheme Closing a scheme. Featured DB Code DC Code Consultations Automatic enrolment Employers are likely to ask you for help to choose and run a good quality pension scheme for automatic enrolment. Exchange Use Exchange to: Understanding your role An introduction to trusteeship Ongoing learning and development Detailed guidance for trustees Protect your members from scammers.

Managing DC benefits 1. The trustee board 2. Scheme management skills 3. Value for members 6. Master trust pension schemes Check if your scheme is a master trust Authorisation of existing master trusts Triggering event duties for master trusts Authorisation of new master trusts Master trust assurance Managing a scheme with mixed benefits. Featured Exchange Pension scams Trustee toolkit Our free elearning programme to help trustees understand their role.

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Guest Editor and Introduction: Accumulation phase The age of members within a scheme will vary; while some may be very close to retirement, others may only have started a career and have many years to go to retirement. Fund scale You are likely to find it helpful to build flexibility into the investment review and assessment of arrangements. Keep abreast of significant corporate, financial and political developments around the world. Values as of December 31, Organic farmers and the social economy:

Automatic enrolment detailed guidance Regulatory guidance Codes of practice Code-related guidance Consultations Statements. Research and analysis Strategy and policy Forms available for download Corporate information Enforcement activity. Featured report Automatic enrolment monthly declaration of compliance report PDF, 92kb, 5 pages This is a rolling report starting from July which we update monthly. Trustees In this section. Communicating and reporting Checking you run a quality DC scheme What happens if you don't meet your duties Closing your DC scheme Reporting requirements Master trust pension schemes Managing a scheme with mixed benefits Independent trustee register.

Investment governance Make sure you have the right investment governance arrangements, involving the right advisers, and that the investment strategies you put in place provide the best chance for your pension scheme members to get a good outcome. The trustee board's role in investment governance. Investment delegation structures Your governance structure should strike an appropriate balance between speed of action, and checks and balances to ensure that actions are appropriate.

When deciding whether you need an investment subcommittee, consider questions like: What is the size of your scheme membership? Does your scheme have the resources to cover the cost of a sub-committee? Fiduciary management Fiduciary management involves a large degree of delegation to the chosen fiduciary manager.


of social investment among union-based pension funds as well as . not served the interests of working people adequately” (cited in Baldwin et al. 11). . reflects the norm for social investment of pensions in Canada: “If ethical choices. These targeted investments often require union built construction. (in the case of Key words: pension funds, labor, targeted investment, responsible investment the Journal of Comparative Social Welfare Volume 25, Issue 2, were held in employer-based defined-contribution retirement plans.

If you consider this as an option for your scheme, you should: Carry out enough due diligence to be comfortable with the degree of delegation involved, particularly if you propose to appoint your existing investment consultant. Note that the skills a successful investment consultant needs are not exactly the same as those that a successful fiduciary manager needs. Establish appropriate reporting relationships and put suitable oversight in place so you can effectively monitor the performance of the fiduciary manager and the underlying mandates.

Clear roles and responsibilities Regardless of the investment governance structure in place, all the involved parties need to be clear on areas where they make decisions, provide oversight, or give advice. Financial and non-financial factors. The market for corporate global responsibility and the role of institutional investors. The fifth stage of capitalism. Halifax, July , Madison WI. Hebb T and Zanglein J. Balancing the Social and Economic, L. Manley, K, Hebb T. Financial and Collateral Impacts in Pensions at Work: Reengineering Community Development for the 21st Century.

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