Pensions: Time to Vote with Our Money: The Vast Pool of 'Workers' Capital' Tied Up in Pension Funds Represents a Potential Source of Leverage for the Securing of More Responsible Corporate Behaviour
Howarth, Catherine, Soundings
The size and power of workers' pension funds has grown astonishingly in recent decades. In the UK pension fund assets are currently worth well over 80 per cent of national GDP ([pounds sterlling]1,150bn); (1) and the figure continues to rise, albeit more slowly today, as employers scale back pension contributions for new and younger workers. This growth of capital in pension schemes has brought with it a major shift in the distribution of capital ownership. In 1961, wealthy individuals owned more than half the stock in UK listed companies. By 2006 their share had shrunk to 20 per cent, whilst over 50 per cent of FTSE 350 companies were owned by UK institutional investors, overwhelmingly investing on behalf of ordinary working citizens. A further large portion is today owned by overseas pension funds, representing working people in countries across the world. But despite this significant 'democratisation' of capital ownership, pension fund members in Britain are almost universally detached from the investment of their money. Meanwhile, civil society institutions, not least unions, have largely failed to recognise the potential of this growing pool of citizens' savings to become a greater source of leverage for progressive ends.
As things stand, the investment of our pensions is heavily complicit in corporate activity that exploits people, communities and environments around the world. Indeed, the pensions industry seems peculiarly unconscious of its power and responsibility. It is caught up in pursuing what is frequently a destructive drive for short-term profit maximisation; there is little evidence in the industry of any understanding of the long-term costs this might impose-either on the pension scheme members for whom the industry is directly responsible, or for the many other stakeholders across the world whose lives and livelihoods are deeply affected by negligent business practice.
To take one topical and strategic area of opportunity: it makes total sense to see pension savings as the key source of capital investment for the long-term infrastructure development that is needed to shift the world economy onto a low-carbon footing. Indeed, in recognition of the extraordinary capacity of the world's pension funds to exacerbate or mitigate the climate crisis, in late 2007 Prince Charles convened a meeting of the ten largest of them, trying to spur them into action. So far this has had mixed results. Some, like Norway's national pension fund-the second largest in the world, with over [pounds sterlling]200bn in investments globally-have developed a coherent policy of actively engaging in companies in which they hold shares so as to apply pressure on them for reductions in greenhouse gas emission. This has been complemented by targeted investment in low carbon technologies, and in companies preparing for rapid adaptation to new climatic conditions. Interestingly, the Norway Fund, and a number of other pioneering pension funds around the world who are taking action to secure a lower carbon investment portfolio, argue for the long-term financial logic of this strategy, even if there were no ethical case. As yet, painfully few UK pension funds are following their lead.
In order to change this, there is an urgent need for the silent millions of ordinary stakeholders in the pensions industry to raise their voices and apply pressure on the gatekeepers, to ensure that the twin aims of securing their own future income in retirement, and the future of our whole environment, are positively reinforcing of each other. FairPensions, the campaigning charity which researches and exposes the activities of the UK's major pension funds, is currently trying to bring this about by raising awareness of the possibilities for action amongst pension fund members. For example, at the time of writing (early 2010), FairPensions was heavily involved in mobilising people across the UK to demand that pension providers with holdings in Shell and BP vote in favour of AGM resolutions calling for clear answers from the boards of both companies about their operations in the Canadian tar sands. …