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July 02, 2010
Landmark Sustainable Investment Law for UK-Based Pension Funds Is Ten Years Old
    by Robert Kropp

The UK Sustainable Investment and Finance (UKSIF) marks the anniversary of ground-breaking regulation with a review of a decade's worth of accomplishments.


On July 3, 2000, one of the world's first laws addressing sustainable investment went into effect, when the UK passed regulation that required pension fund trustees to disclose their policies on sustainable investment. At the time, Penny Shepherd, Executive Director of the UK Sustainable Investment and Finance (UKSIF), called passage of the law "a historic moment."

The Occupational Pension Schemes (Investment) Regulation states, "A statement of investment principles must be in writing and must cover at least the following matters: the extent (if at all) to which social, environmental or ethical considerations are taken into account in the selection, retention and realization of investments; and their policy (if any) in relation to the exercise of the rights (including voting rights) attaching to the investments."

"Over time," Shepherd said then, "It should lead to a major increase in ethical investment by occupational pension funds."

Ten years later, UKSIF has published a
report that outlines the major developments in sustainable investment during the past ten years, and lists the organization's expectations for the next decade.

Observing that the UK's disclosure regulation has since been adopted by at least ten additional countries, the report states that long-term sustainable investment has become an integral part of the fiduciary duty of pension fund trustees. Disclosure requirements in the UK have been extended to include charity investors and pension providers as well.

Another important development in the spread of sustainable investment practice has been the launch of several global initiatives, including the
Principles for Responsible Investment (PRI), the Institutional Investors Group on Climate Change (IIGCC), and the Carbon Disclosure Project (CDP).

Looking ahead, the report states, "UKSIF expects responsible ownership and investment to become the norm for major occupational pension funds and insurance companies worldwide by 2020."

The ten "key signals of change" listed in the report include increased shareowner empowerment, and the integration by asset managers of "responsible ownership and investment into marketing and promotion, service development strategies and staff development."


 

 
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