Investment: Savers win by showing a social conscience

THERE IS a tradition in some investment circles of looking at the world in a fairly cynical manner. Okay, so a few companies might contribute a tad to global warning and sell a few ciggies too many but did you see their results last week? And look at those share prices.

The fact is, this approach does not correspond with the view expressed by those most affected by this fund management style: ordinary savers, who would like to see a social dimension applied to how their money is invested. This is even more the case in relation to pensions. According to a survey by the Ethical Investment Research Service (Eiris) 73 per cent of us would like our pension funds run on ethical lines.

Perhaps more surprisingly, almost a third of those questioned would also be prepared to accept some reduction in their pension benefits as a result.

In any event, this choice is denied to members of occupational schemes. Only the self-employed or those opting out of employers' schemes can choose to invest into "ethical" or "green" funds through a personal pension plan. Here the range of funds available is growing. Most providers already offer an ethical unit trust, and reproduce its asset allocation in their pension fund.

Examples include NPI's Global Care pension fund, which has shown better than 70 per cent growth over three years.

The Stewardship fund from Friends Provident grew by 40 per cent over the same period, coming second in the Balanced Managed fund category against mostly non-ethical competitor funds.

For members of occupational schemes seeking to top up their pension benefits most ethical pension providers also offer access to their funds through so-called free standing additional voluntary contributions (FSAVCs). Anyone contracting out of the state top-up scheme, Serps, can also choose to have higher National Insurance contributions paid into a contracted out "appropriate personal pension" (APP) investing in an ethical fund.

John Denham, the Pensions minister, is considering proposals that would require employers' pension scheme trustees to disclose whether and how non-financial considerations might influence their conduct in running these funds.

"This is an issue of key importance," says Karen Eldridge of Eiris, "because of the very large amounts of investment capital held in UK pension funds and mostly invested into British company shares."

Common sense suggests that if pension scheme members elect to have their fund contributions invested according to given ethical or ecological guidelines, they should be allowed to do so.

But Charles Scanlan, head of the pensions department at law firm Simmons & Simmons, says: "A pension fund is held in trust and run on behalf of its beneficiaries by trustees who are obliged to act in their best interests.

"Trustees could be held legally liable if they fail in their duties. Essentially, they must make investment decisions in the best interests of all scheme members. Also, in the case of defined benefit pension schemes - those set up to pay pensions which are equivalent to fractions of final salary - the employer company may be liable for any underfunding.

"One can argue that in certain circumstances comparing the [ethical] policies of two similar firms when deciding which one to buy shares in is wholly congruent with acting in the best interest of scheme members." This applies in what is called a "tie break" situation where a decision has to be made between two similar investments.

A Green Paper in December suggested pension scheme trustees should feel able to consider moral social and environmental issues. These could be laid out in a statement of investment principle.

But in a further consultative document in January that has been changed to a bare statement of whether trustees should be allowed to mention "any considerations other than financial ones" in their statement of the investment principles under which they run a fund. "Many of those making some contribution during this consultative process welcomed these proposals, but this change of wording amounts to a dilution of what was originally proposed," says Ms Eldridge.

"The question now is whether any substantive change for the better will come out of all of this."

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksA special investigation by Andy McSmith
Arts and Entertainment
Larry David and Rosie Perez in ‘Fish in the Dark’
theatreReview: Had Fish in the Dark been penned by a civilian it would have barely got a reading, let alone £10m advance sales
News
Details of the self-cleaning coating were published last night in the journal Science
science
News
Approved Food sell products past their sell-by dates at discounted prices
i100
News
Life-changing: Simone de Beauvoir in 1947, two years before she wrote 'The Second Sex', credited as the starting point of second wave feminism
peopleHer seminal feminist polemic, The Second Sex, has been published in short-form to mark International Women's Day
News
i100
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Evening Administrator

£8 per hour: Recruitment Genius: This Pension Specialist was established early...

Guru Careers: Executive Assistant / PA

£30 - 35k + Bonus & Benefits: Guru Careers: We are seeking an Executive Assist...

Ashdown Group: Graduate Application Support Analyst

£25000 - £30000 per annum + benefits: Ashdown Group: A global leader operating...

Reach Volunteering: External Finance Trustee Needed!

Voluntary post, reasonable expenses reimbursed: Reach Volunteering: Would you ...

Day In a Page

Homeless Veterans campaign: Donations hit record-breaking £1m target after £300,000 gift from Lloyds Bank

Homeless Veterans campaign

Donations hit record-breaking £1m target after huge gift from Lloyds Bank
Flight MH370 a year on: Lost without a trace – but the search goes on

Lost without a trace

But, a year on, the search continues for Flight MH370
Germany's spymasters left red-faced after thieves break into brand new secret service HQ and steal taps

Germany's spy HQ springs a leak

Thieves break into new €1.5bn complex... to steal taps
International Women's Day 2015: Celebrating the whirlwind wit of Simone de Beauvoir

Whirlwind wit of Simone de Beauvoir

Simone de Beauvoir's seminal feminist polemic, 'The Second Sex', has been published in short-form for International Women's Day
Mark Zuckerberg’s hiring policy might suit him – but it wouldn’t work for me

Mark Zuckerberg’s hiring policy might suit him – but it wouldn’t work for me

Why would I want to employ someone I’d be happy to have as my boss, asks Simon Kelner
Confessions of a planespotter: With three Britons under arrest in the UAE, the perils have never been more apparent

Confessions of a planespotter

With three Britons under arrest in the UAE, the perils have never been more apparent. Sam Masters explains the appeal
Russia's gulag museum 'makes no mention' of Stalin's atrocities

Russia's gulag museum

Ministry of Culture-run site 'makes no mention' of Stalin's atrocities
The big fresh food con: Alarming truth behind the chocolate muffin that won't decay

The big fresh food con

Joanna Blythman reveals the alarming truth behind the chocolate muffin that won't decay
Virginia Ironside was my landlady: What is it like to live with an agony aunt on call 24/7?

Virginia Ironside was my landlady

Tim Willis reveals what it's like to live with an agony aunt on call 24/7
Paris Fashion Week 2015: The wit and wisdom of Manish Arora's exercise in high camp

Paris Fashion Week 2015

The wit and wisdom of Manish Arora's exercise in high camp
8 best workout DVDs

8 best workout DVDs

If your 'New Year new you' regime hasn’t lasted beyond February, why not try working out from home?
Paul Scholes column: I don't believe Jonny Evans was spitting at Papiss Cissé. It was a reflex. But what the Newcastle striker did next was horrible

Paul Scholes column

I don't believe Evans was spitting at Cissé. It was a reflex. But what the Newcastle striker did next was horrible
Miguel Layun interview: From the Azteca to Vicarage Road with a million followers

From the Azteca to Vicarage Road with a million followers

Miguel Layun is a star in Mexico where he was criticised for leaving to join Watford. But he says he sees the bigger picture
Frank Warren column: Amir Khan ready to meet winner of Floyd Mayweather v Manny Pacquiao

Khan ready to meet winner of Mayweather v Pacquiao

The Bolton fighter is unlikely to take on Kell Brook with two superstar opponents on the horizon, says Frank Warren
War with Isis: Iraq's government fights to win back Tikrit from militants - but then what?

Baghdad fights to win back Tikrit from Isis – but then what?

Patrick Cockburn reports from Kirkuk on a conflict which sectarianism has made intractable