CSR: Pension funds turn up ESG dial
Blue states lead lagging US on environmental, social and governance (ESG) investing; pension funds hold investment managers accountable.
In June, Japan’s Government Pension Investment Fund, the largest pension fund in the world, with more than $1.3 trillion in assets, said it plans to raise its allocation to environmentally and socially responsible investments to 10% of its stock holdings from 3% now. It recently chose three environmental, social and governance (ESG) indices as benchmarks, including the FTSE Blossom Japan Index and the MSCI Japan Empowering Women Index.
It is a huge show of support for ESG investing from a sector that has not uniformly embraced responsible investing. Alex Bernhardt, the US head of responsible investment at consultants Mercer, says US pension funds have been slow in comparison with European or Australian funds in adopting ESG principles for their investments.
“Large US pension funds have had aggressive ESG agendas for some time and have tended to focus on the ‘G’, but there is a huge number of smaller muni and private pensions that are doing very little,” he says. In part, that is because they lack the resources to fully assess and engage with the companies in which they invest.
Bernhardt feels the mood is shifting in the US: “Some investors seem more galvanized since the 2016 election to do more around ESG.