For more information about PIRC or to arrange a meeting, contact Janice Hayward, or call us on 0207 247 2323.
Brown, green and blue
The decision of Prime Minister Gordon Brown to rule out an early election happily relieves us of the need to scour the parties’ manifestos for policy commitments on governance or CSR, or hints about future direction. Instead then readers might want to cast their eye over the recent report of the Conservative Party’s Quality of Life Policy Group, which was chaired by John Gummer and Zac Goldsmith.
Without question, the report raises the prospect of policies that would have been unthinkable in even recent Tory history. Even the idea that you need to tax certain behaviours in order to deliver desirable environmental outcomes is an implicit admission that the market doesn’t always work in a way that is best for society (which, incidentally, is now acknowledged to exist).
However we’ll avoid the headline recommendations that have already received much coverage and instead draw your attention to the section on pension funds and insurance companies (starting on page 434 of the full report). Here the language and proposals are more akin to those of an NGO than the Conservative Party of old. For example, the report claims that “there is a growing fiduciary risk associated with climate change” and that pension funds and insurance companies are not doing enough presently. On policy, the report says that the disclosure requirement in schemes’ Statement of Investment Principles (SIPs) should be strengthened to define the meaning of “social, environmental or ethical considerations.” More controversially it also calls for FSA to require all pension funds to include a climate change clause in their fund management mandates.
“This would insist that ‘In the selection, retention and assessment of managers, trustees will give consideration to how the fund manager invests with regard to Article 2 of the UN Framework Convention on Climate Change.’”
And the report also calls for the Chancellor to tour the City to encourage asset managers to sign up to the UN Principles of Responsible Investment.
Clearly we need to stress that these are simply policy recommendations, not decisions, and there is no obligation for the Tory leadership to adopt any of them. In addition the recommendation on mandates does not make it into the cut-down executive summary, where only the suggested tweak to SIPs is included. Of course this might simply be a question of editing, but a slight change to a disclosure regulation would seem like much less of a hassle to the pension fund lobby than a change to fund manager contracts.
That said the fact that the Tories are even entertaining ideas about furthering the adoption of SRI by pension funds is a clear break with the past, and a challenge to Labour. Can we dare to hope that this is one area where the parties might feel the need to compete on progressive policy?
