Responsible Investment: A long view

(this article was published in Professional Pensions 12 September 2013 on behalf of the AMNT. There is a typo at the beginning in the web link)

"When I first became a member representative on a British Pension Scheme in the middle 1990's many advisors and fund managers saw their role as maximising return and had little or no interest in responsible investment.

Ethical or Green funds were dismissed as fit only for tree hugging, sandal wearing muesli eaters. Engagement was something couples did before they got married and most attempts to discuss the social impact of investments were blocked in hushed, reverend tones with the magical words "Scargill v Cowan".

Followed by the explanation that the law forbids any mention of such evil thoughts on pain of instant surcharge. I do of course exaggerate but only slightly.

Since then there has been on the face of things, a profound change in attitudes towards responsible investment and governance. We found out that the Judge who presided over the infamous Scargill v Cowan case had actually hinted in his judgment that pension funds could have an ethical policy.

The report by international legal firm Freshfields in 2005 said not only was it permissible for funds to have an ethnical policy it was arguable their fiduciary duty to do so and trustees could find themselves sued if they didn’t have one! Nearly all investment houses now have (or claim) a responsible investment team.

There is also increasing recognition that pension funds should be focused on the long term and not simply obsess on short term volatility. The concept of “engagement” with companies by shareholders has become pretty mainstream. Schemes have a duty to try and ensure that the companies they invest in are properly run and well managed.

This is not only a duty but self interest. The 18th Century Father of Economics, Adam Smith, warned investors that they will be ripped off by those they employ if they do not play an active part as “owners”. But has it all really changed from “the bad old days”?

Pension trustees were accused of being asleep on duty during the lead up to the financial crisis of 2007. Lord Myners "Where were the owners when these disastrous decisions were taken...?”

How much influence do the corporate governance teams actually have? Is it only a marketing ploy and mere “window dressing”?

BP had a pretty rotten record for many years on environmental issues. So why didn’t investors change the company culture and prevent the Gulf oil disaster and the resulting shredding of billions of pounds of shareholder value?

Have any fund managers or advisors been sacked due to poor performance on engagement? If not, why not?

If responsible investment issues are so important why don’t pension advisors start each trustee meeting with this as their first agenda item?

Why do most managers reports to trustees make no reference whatsoever to Responsible investment?

I think on balance it has been a case of two steps forward and one step back. There is acceptance of engagement even if it is too often noise not substance. So there is still a job of work for trustees to do.

I think that it is easy to blame trustees and to forget how isolated many pensions trustees feel at their meetings. It takes a lot for lay people to feel confident enough to challenge professional advisors and fund managers. Yet this is a fundamental part of our job as trustees.

While we should not be micro managing those we employ to advise us we should be holding them very firmly to account.

Finally, never forget that Responsible investment is actually all about maximising return. Our mantra must be that such investment in companies with good governance will produce superior returns".

(Great picture of Miners Union leader, Arthur Scargill after a visit to a coal mine. Arthur sacked the union's legal team and unwisely represented himself at court in "Scargill v Cowan" case)

Labour, Trade unions, SPGB, the Anarchist President, Bill, Dave and John

Last month I took part in a debate organised by the Socialist Party (Great Britain) on "Should trade unionists support the Labour Party?" They did record the event and I was hoping to link to it, but it seems that there was some technical problem. Which was a shame since I thought it was actually quite a good debate.  Bill Martin from the SPGB (a UNISON activist) spoke against the motion.  He also chaired the meeting and was at all times polite and courteous. 

There was of course a completely wide gulf between us. The SPGB is a Marxist, anti-capitalist, revolutionary Party.  Readers of this blog might possibly have noticed that I am not. They are also "anti-Leninist" and "anti-Stalinist" and were completely dismissive of various Trotsky newspaper sellers (I make no comment). There was only 15 people present (including the anarchist President of the NUJ)

I argued that "my kind of socialism is one politically based on parliamentary democracy, and economically, a true mixed and balanced economy of publicly owned services, mutually and privately owned enterprises, all properly regulated, subject to democrat scrutiny, the law and a truly progressive tax system. While socially a successful Socialist Society must be one that is equal and free. Open, tolerant, and most importantly, supportive of dissenting views".

I mentioned my family background and The Spirit Level. In my view trade unionists should not only support the Labour Party, but take an active part in the Party arguing within for change. Bill made a number of points about the role and nature of trade unions and the argument that it is better for unions to be aliened to no particular political party.

I had a top Labour ringer with me, Dave Draycott.  Dave is the Unite Branch secretary for Leeds City and also a Labour Party Councillor in Calderdale.  It was the first time Dave and I had ever met up in person (rather via email or social media). In the Q&A that followed he made (in my view) a number of forceful and well made points. In particular the need for a true plurality in any socialist society to prevent the inevitable tendency to oppression, that you get in any society where any single political or economic belief is dominant.

Afterword we all went to the local pub and continued the debate. The SPGB have some interesting characters. One very forthright and vocal SPGB member had been brought up in a London working class family who "worshipped Mosley".  Another, use to be the secretary to the National Coal Board Pension scheme.  With my pension governance hat on we had an interesting conversation about "Arthur" and  Cowan v Scargill. He had also enjoyed hugely this post.

Update: Bill (aka Deathy) has let me know that he is sure that the vocal recording of the debate did work and he will chase it being posted on their website.

“Even the Olives are Bleeding...”

Yesterday I posted here on listening to an interview on Radio 4 with a BNP apologist for the murder and torture of British POWs.

I was driving home to London from Edinburgh. The next radio programme iPM calmed my soul and restored my faith somewhat in the world. The iPM programme firstly had an intelligent feature on “strikes” and “picket lines”. Its listener’s reported mostly positive and uplifting experiences of taking part in strike action including romance, humour and camaraderie. But there were also some negative experiences.

A former British Leyland machinist turned coal miner who scabbed during the national strike of 1984-85 talked about his experiences and how now 25 years later he recognised that NUM leader Arthur Scargill had been right at the time to fight pit closures but he should have “...had the guts to hold a national ballot”. Which I thought was just a little bit rich and self serving. This “anonomised” worker had recently been out on strike action over zero pay offers which he supported. Not least since the company enjoyed not only good profits but was still paying their executives big bonuses!

The next feature was about the Irish poet, Charles Connolly, who was killed aged 24 in action fighting the fascists during the Spanish Civil War. His family had been invited to Spain to take part in recent commemorations.

Shortly before Charles was killed in battle he made the remark to a compatriot about this bloody war that “even the olives are bleeding....”.

You can listen again to the programme (recommended) on iplayer for the next few days or so - but I have down loaded it as a podcast so if you send me your email I assume I can forward it to you (12MB file!)