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PENSION FUNDS TO ADOPT ETHICAL INVESTMENT POLICY

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Pension funds are about to shift their investment strategies towards 'socially responsible' investment, a survey to...
Pension funds are about to shift their investment strategies towards 'socially responsible' investment, a survey to be published this week will show, reported The Sunday Times (Business, p2).

Under the terms of some Pensions Act amendments that take effect on 3 July, Britain's pension funds will be required to disclose whether they take full account of the environmental, social and ethical impact of their investments. The survey, by the environmental consultancy ERM, will show that in response to this requirement, 21 of the top 25 pension funds in Britain intend to implement socially responsible investment strategies.

The result could be a big shift in the nature of pension-fund investment. Pension fund assets in Britain total£800bn, but investments in 'green' or ethical investments amount to only about

£3bn.

The survey also shows that funds will adopt a more sophisticated approach than merely boycotting whole sectors such as arms, tobacco and alcohol.

'Pension funds are increasingly going to look for companies where the good management of environmental and social risks enhance , or at least protects, shareholder value', said Brian Pearce, an economist with ERM. 'The traditional green or ethical approach of excluding certain sectors or companies is unlikely to be followed because of the funds' fiduciary duty to seek the best return for their beneficiaries'.

The government originally planned to direct pension funds towards socially responsible investment. Lobbying from the National Association of Pension Funds forced ministers to water down their proposal to one of disclosure.

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