Socially responsible investment pension funds

I CHANCED upon this ILO (International Labor Organization) publication on Global Extension of Social Security (GESS) that featured the issue on Socially Responsible Investment (SRI). Let me share with you a portion of the document, which I find very timely and relevant for our Social Security System (SSS, which recently issued a policy of increasing our monthly premiums) and Government Service Insurance System (GSIS) to benchmark on in investing our pension funds.

SRI is becoming a prevalent practice globally. According to Mercer (2007), SRI is "an investment process that seeks to achieve social and environmental objectives alongside financial objectives." Moreover, the signatories of the United Nations Principles for Responsible Investment (UNPRI) believe that "environmental, social, and corporate governance (ESG) issues can affect the performance of investment portfolios (to varying degrees across companies, sectors, regions, asset classes and through time)." The diversity in definitions of SRI reflects the variety of approaches in "socially responsible" investments, and its concept varies among investors in different countries.

Here are concrete examples of what a socially responsible pension fund can do based on the good practices of these five countries:

• Previ. This is the employees’ pension fund of the state-owned Banco do Brasil. It is the largest pension fund in Latin America. Previ views companies as potential change agents through which social and environmental issues can be addressed and contributions made for the development and sustainable growth of Brazil. It invests in companies that are both profitable and socially responsible and that benefit the communities in which they operate.

• The Norwegian Government Pension Fund Global. This is a sovereign fund that invests proceeds from Norway’s petroleum industry. It is closely tied to the government. In 2001, the Norwegian government established, on a three-year trial, a dedicated "Environment Fund" for investing in companies in emerging economies that met environmental performance criteria. The Environment Fund was conceived as a mechanism to promote sustainable development. In 2002, the Graver Committee was appointed to develop an approach to ethical investment by the Fund and to propose ethical guidelines. The committee justified that the Fund should avoid complicity in violation of ethical norms linked to human rights and to the environment.

• The Government Employees Pension Fund (GEPF). This is Africa’s largest pension fund. The GEPF implements ESG issues in its investment decisions using a positive screening strategy such as devoting a portion of its assets to investments that address socio-economic imbalances, especially financing Broad-Based Black Economic Empowerment and HIV/AIDS initiatives.

• The Government Pension Fund. This is one of the largest institutional investors in Thailand. It is designed for officials of the Royal Thai Government and is autonomous from the Ministry of Finance. It does not invest in the alcoholic beverages sector because alcohol consumption is against the values of most Thai people and the GPF wants to avoid offending its beneficiaries. It has also extended its focus to environmental and social performance.

• CalPERS. This is the largest public pension plan in the US and the third largest in the world in terms of assets under management. It provides a variety of programs and services to California’s public employees, retirees, and their families. CalPERS is recognized as a leader in corporate governance. It prudently exercises ownership rights with the objective of increasing shareholder value while minimizing risk. It undertakes legal action and lobbying when necessary.

I wonder when our SSS and GSIS pension fund managers will refocus their strategies on socially responsible investments. The sooner they can do this, the better for us and the entire country.

(The author is a Full Professor at the Management and Organization Department of the Ramon V. Del Rosario College of Business of De La Salle University. She teaches Human Behavior in Organizations, Strategic Human Resource Management, Labor Relations, and Research. She is also a management consultant to SMEs, schools, and NGOs. She may be reached at divina.edralin@dlsu.edu.ph. The views expressed above are the author’s and do not necessarily reflect the official position of De La Salle University, its faculty, and administrators.)

source:  Businessworld