ShareAction: Responsible fiduciaries must grapple with ESG

first_imgConcerns about the pitiful prospects for millions of people in the UK currently in workplace defined contribution pension schemes is well founded. It should lead trustees and others with responsibility for investment decisions to focus on working assets harder. This should not mean turning over portfolios evermore frequently – it should mean attentive stewardship of companies in pension portfolios based on analysis of the full range of risks that may inhibit returns over the short, medium and long term.The long term is, of course, what counts for most pension savers. To protect the interests of younger savers in particular, there’s a compelling case for fiduciaries to engage with the long-term economic implications of climate change. Lord Stern, the former World Bank chief economist who undertook a rigorous cost-benefit analysis of ignoring climate change, found that “the overall costs and risks of [inaction on] climate change will be equivalent to losing at least 5% of global GDP each year, now and forever”. He adds: “If a wider range of risks and impacts is taken into account, the estimates of damage could rise to 20% of GDP or more. In contrast, the costs of action – reducing greenhouse gas emissions to avoid the worst impacts of climate change – can be limited to approximately 1% of global GDP each year.”Any prudent trustee with responsibility for the retirement savings of people under 45 years of age should be paying close attention to avoiding the potentially devastating impact of climate change on fund valuations in the decades to come. The low-carbon transition our economies must inevitably undergo will not be without some short-term pain, particularly for investors with heavy exposure to high-carbon sectors. Responsible fiduciaries have no choice but to grapple with these challenges. It is hugely encouraging Europe’s pension funds are now doing so.Catherine Howarth is chief executive at ShareAction Catherine Howarth, chief executive at ShareAction, says pension funds have no choice but to grapple with the issue of climate changeIPE deputy editor Daniel Ben-Ami is absolutely right to argue, as he does in his recent comment piece, Keep Politics Out of Pensions, that pension funds’ investment decisions should avoid political bias. The courts have ruled that trustees are barred from bringing their own political or ethical views, however strongly held or well intentioned, into decisions made as fiduciaries of other people’s money. There can be one, and only one, consideration for those who make investment calls with others’ retirement savings: the best interests of the saver.This requirement to secure savers’ best interests, which entails a strong though not exclusive focus on financial interests, is exactly why high-performing pension funds in the UK and across Europe have embraced responsible investment in recent years. The terminology of ‘environmental, social and governance’ (ESG) may be somewhat clumsy, but the wide variety of considerations that fall under that umbrella are demonstrably material to savers’ financial security and quality of life in retirement.Research undertaken by Arabesque Partners in association with Oxford University, published last year, assessed 200 of the highest-quality academic studies examining the economic evidence for sustainability. This showed that 90% of studies find that sound sustainability practices lower companies’ cost of capital, and 88% of studies show that strong ESG performance drives better operational performance by companies. Even when focusing on shareprice performance, 80% of studies find a positive correlation between good sustainability practices and strong share price performance.last_img read more

Continue reading

Chelsea complete Filipe Luis swoop

first_img The 28-year-old played an integral part for Atleti last season as they won the Primera Division and made it to the Champions League final but the Brazilian is clearly excited by the prospect of playing in England. “This move is a dream come true for me,” he said. “I now have the opportunity to play for Chelsea, and also in the Premier League. “I’m very happy and looking forward to getting started and giving my best for the team during the coming seasons.” Filipe Luis now has an opportunity to replace Ashley Cole as Chelsea’s first-choice left-back in the long-term. After missing much of the 2013-14 season through injury, veteran England defender Cole left the Blues on a free transfer in June and has since joined Roma. Natural right-back Cesar Azpilicueta proved an able deputy to Cole and kept hold of his spot when the 33-year-old returned to fitness as Chelsea finished third in the Premier League, but Filipe Luis’ arrival will allow the Spaniard to return to his preferred flank. Filipe Luis joined Atleti from Deportiva La Coruna in 2010 and has made 98 appearances in all competitions for the Madrid side, winning the Europa League in 2012 and the Copa del Rey in 2013 before becoming a league champion. He has four Brazil caps and was placed on the standby list for the 2014 World Cup in his homeland. Chelsea have completed the signing of Filipe Luis from Atletico Madrid, the Barclays Premier League club have announced. The Blues reached an agreement to sign the left-back from the Spanish champions on Wednesday and have now agreed terms on a three-year deal. “Chelsea Football club is delighted to announce the signing of Filipe Luis from Atletico Madrid,” read a statement on the club’s official website. ” The Brazilian defender has signed a three-year contract and will wear the number five shirt.” center_img Press Associationlast_img read more

Continue reading