Responsible investment has been something with which many trustees have struggled. Although trustees are under fiduciary duty to provide the highest returns for members, the impact of investments on wider society and the environment has become increasingly important.
However, the approach to such responsible investment has been different. Some schemes have used the exclusion method – not investing in companies, such as arms manufacturers, that can have a negative impact on society.
Others have decided to remain invested in companies in order to engage with the board, which could result in better governance and therefore better returns.
It has been reported that Archbishop Desmond Tutu has waded into the responsible investment debate. He has written to Dutch super-pension the €309bn (£246bn) ABP to ditch its investments in three Israeli banks – Bank Hapoalim, Bank Leumi and Mizrahi Tefahot Bank.
According to Reuters, the Nobel Peace Prize winner wrote to the scheme’s board saying the investments “enable the expansion of Israeli settlements on occupied Palestinian territories, and profit from the illegal seizure of this land”.
He continued: “Your board has a choice – continue to turn a blind eye to the facts and claim ABP investments are somehow ringfenced from bolstering Israel's occupation, or join the growing movement towards divestment, which will reduce the company's risk, respect international law and strike a powerful, non-violent blow for peace in the Middle East.”
However, the approach to such responsible investment has been different. Some schemes have used the exclusion method – not investing in companies, such as arms manufacturers, which can have a negative impact on society.
Others have decided to remain invested in companies in order to engage with the board, which could result in better governance and therefore better returns.
It has been reported that Archbishop Desmond Tutu has waded into the responsible investment debate. He has written to Dutch super-pension the €309bn (£246bn) ABP to ditch its investments in three Israeli banks – Bank Hapoalim, Bank Leumi and Mizrahi Tefahot Bank.
According to Reuters, the Nobel Peace Prize winner wrote to the scheme’s board saying the investments “enable the expansion of Israeli settlements on occupied Palestinian territories, and profit from the illegal seizure of this land”.
He continued: “Your board has a choice – continue to turn a blind eye to the facts and claim ABP investments are somehow ringfenced from bolstering Israel's occupation, or join the growing movement towards divestment, which will reduce the company's risk, respect international law and strike a powerful, non-violent blow for peace in the Middle East.”
Earlier this month ABP said it had received “several thousand messages” about their investments in Israeli banks.
In a statement released yesterday ABP said after a trustee meeting it would uphold the existing policy for responsible investing.
It stated: “That policy formulates a number of objective, rational criteria along which the investments are assessed. According to the criteria of the existing policy, the investments in Israeli banks are not in breach of Dutch or international laws and regulations.”
Earlier this year, another Dutch fund, the PFZW, divested from five Israeli banks.
UK schemes have long struggled with the question of responsible investing. Last year, the Church of England courted controversy when it was found they were invested in high-interest lender Wonga, after Archbishop of Canterbury Justin Welby condemned the company’s practices, calling them “morally wrong”.
Earlier this year, the Law Commission clarified trustees’ fiduciary duties in respect to responsible investment. The report stated trustees had scope to take into account environmental, social and governance factors when making investments.
The report also said trustees may take into account non-financial factors, such as ethical issues, if they meet the following test:
They have good reason to think scheme members share the concern;
There is no risk of significant financial detriment to the scheme.
However, polling members on their thoughts on Middle Eastern politics could prove contentious.
With leading world figures wading into pensions investments, making responsible decisions may become harder.