Finance: Charity pension funds 'leading the way' in ethical investments

Charity pension funds are far more likely than their private or public sector counterparts to actively pursue ethical or socially responsible investment policies, according to new research.

A study of 79 UK pension funds by the Ashridge Centre for Business and Society concluded that charities were "leading the way in changing investment practice" by screening their investments, engaging with investee companies and exercising voting rights at AGMs.

Thirty-eight per cent of the charity pension funds polled used positive screening - selecting best-in-class companies in specific sectors - compared with 11 per cent of public sector funds and 13 per cent of private sector funds.

The same percentage of charity sector funds used negative screening to exclude certain sectors or companies from their portfolios. This contrasts with 11 per cent of public sector funds and 7 per cent of private sector funds.

Sixty-three per cent of charity funds said they "engaged with investee companies to encourage better performance". This compared with only 20 per cent for the public sector.

Meanwhile, 75 per cent of charity funds exercised their voting rights as shareholders at company AGMs. They were much more active than public funds (20 per cent) or private funds (35 per cent).

"Charities are aware that they have a social purpose," said Chris Gribben, a co-author of the report. "They have vast assets under management and they want to align investment practice with their values."

Pension funds from all sectors told a 2004 Ashridge survey that they planned to adopt more socially responsible investment practices. But only charities have been as good as their word.

The report also demonstrated that charities have more belief than other sectors that a good record on social and environmental issues will improve shareholder value.

Sixty-three per cent of charity pension funds thought effective environmental management would "have a substantial positive impact on the market value of the FTSE 100 in the longer term". Only 36 per cent of public and 29 per cent of private funds agreed. They tended to believe that the quality of customer relations and good corporate governance were more important.

The research was conducted for Just Pensions, which is part of the UK Social Investment Forum. Eight charity pension funds were surveyed, most of which had assets of less than £250m.

- See Letters, page 25.

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