Our Money, Our Business: Building a more accountable investment system

Yesterday evening I went to the launch of two new reports by ShareAction at the Nuffield Foundation in central London. Chaired by their CEO, Catherine Howarth.

Christine Berry from ShareAction presented on the reports "Our Money, Our Business: Building a more accountable  investment system" and "Engaging savers with stewardship and responsible investment".

Christine argued that in light of pension auto enrolment we need to revisit ideas such as those expressed in the book by David Pitt-Watson, "The New Capitalists", since there will now be a huge expansion of share owners. However, at the moment share owner governance is a "dead duck" and we need to reassert the legitimacy of shareholders as owners. We also need to counter the idea that no one is really interested in what happens to their savings.

Research by the Pension Trust (whose chair Sarah Smart was sitting in the same row as me) suggested that its members were not that interested in whether their fund was invested in the traditional "sin stocks" (such as tobacco) but were interested in environmental issues and labour rights.

The first speaker was Mark Fawcett from NEST who pointed out that in modern day Direct Contribution (DC) schemes, savers are exposed to all the risk then it is likely that members will have to take a more active interest in their savings (whether they like it or not).

Roger Urwin from advisers, Towers Watson, was concerned that the reports were important but maybe heavy on aspiration and light on what could be catalysts to bring about change.

Charlotte Black, from high net worth private investor manager, Brewin Dolphin, thought this was an important issue and could show the good side of capitalism but her 120,000 investors had never used the proxy share voting system she had put in place.

My question to the panel was that we need to have better and stronger representative democracy by a elected trustee based model. Advisers are very important but they do not have the fiduciary duty or mandate that elected member nominated trustees will have. Saying that, trustees do have to raise their game and become better trained and more assertive but they do need support.

(good luck to Christine who is soon leaving ShareAction for a new job.)

"Can pension funds shape the future of capitalism?"

Catching up on things. Last month I went straight from the TUC Trustee Pension Conference to the Fair Pension's Guest Lecture at the House of Commons. This was the second presentation I had been to that day on "Capitalism and pensions". I was with a notoriously quiet and reserved UNISON colleague who is a Local Government Pension (LGPS) expert. The lecture was given by Professor Keith Ambachtsheer, Director of the Rotman Institute for Pension Management (left of picture).

He was introduced by John Cruddas MP who is the Chair of the All Party Parliamentary Committee for Responsible Investment. The meeting was Chaired by Catherine Howarth of Fair Pensions.

You can read an account of his speech (and that of Mark Fawcett, Chief Investment Officer at NEST - right of picture) and the full text here. My take on Ambachtsheer is that he believes that Capitalism must be transformed by those who invest in pensions acting as active owners and demanding that capitalism is transformed into a sustainable and wealth creating model. Rather than mainly benefiting "agents" and being subject to their whims.

What I also found striking in his speech was that the traditional argument over pensions about which is best: Defined Benefit or Defined Contribution? Is the wrong question to ask. Instead you should be more concerned with Scale (size of fund), Governance, Investment belief and Fees.  I asked a question about the Local Government Pensions Scheme (LGPS) which has around £140 billion in assets but is split into 101 different funds. Ambachtsheer thought this was just completely wrong to have so many small funds.

Afterwards we went to the St Stephens Tavern where we had some very "interesting" conversations about the future of the LGPS from across the political divide.