Socially Responsible Investment
Updated by Julien Goy on 12.06.2015
Pension fund managers increasingly feel they have a responsibility to contribute to sustainable development in their business activities. When looking into the main attributes of pension funds – size, investment horizon and diversification – it is possible to see that they have the characteristics that qualify them as natural supporters of socially responsible investment. Since pension funds take decades-long approach, Socially Responsible Investment (SRI) would be particularly appealing, as it takes an explicitly long-term approach.
Thus, an SRI fund can address different topics such as ethics, environment, governance, social aspects, economics, labour rights, international and national norms, amongst others.
The choice of which dimensions are covered by the funds, and how, is up to the managers, therefore impacting the definition of SRI. For this reason, any organisation that plans to engage in SRI needs to establish a clear strategy based on a sound knowledge of the various alternatives that are available.
Not only is SRI within the bounds of investor’s fiduciary duties, but it even seems to be strongly recommended. In addition to the enhanced return on investment that such a strategy can provide, many pension funds, in order to avoid damage to their own reputation, have realized that “they have to avoid investments that are publicly perceived as (socially) unacceptable or irresponsible”.4
The practice of SRI can take many forms, often complementary.
1 Mercer, "The language of responsible investment: An industry guide to key terms and organisations", London, 2007, p.10
2 UNPRI Principles.
3 et4 Allianz Global Investors, "Doing Good by Investing Well? Pension Funds and Socially Responsible Investment: Results of an Expert Survey", International Pension Papers, no. 1, 2010, p.4, p.9.