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date: 16 January 2009

embargo: 00.01hrs Monday 19 January 2009

Government urged to press pension funds to become responsible investors

The TUC, MPs and leading figures from the pensions and investment industry are today (Monday) urging the Government, institutional investors and fund managers to back a series of proposals on responsible investment to help address the practices that contributed to the current financial crisis.

The joint statement says that 'recent events have shown how the failure to hold corporate leaders to account for their decisions about risk can have a catastrophic effect on the financial system, the economy, the corporations themselves and ultimately the well-being of members of pension schemes.'

Signatories include Treasury Select Committee Chair John McFall MP, Work and Pensions Select Committee Chair Terry Rooney MP, founder of Hermes Stewardship Services David Pitt-Watson and TUC General Secretary Brendan Barber.

The statement calls for pension funds to insert a 'do no harm' clause into their statement of investment principles. This would require fund managers and advisors to satisfy pension fund trustees that their investment decisions are not causing systemic harm to the financial system.

The statement also calls on institutional investors to sign up to the United Nations- backed Principles of Responsible Investment (PRI). The principles set out commitments for investors on engagement around corporate governance, environmental and social performance.

The group have written to the Prime Minister urging the Government to back the proposals in the statement and, if progress is not made, to consider making the 'do no harm' clause a statutory responsibility for pension funds.

TUC General Secretary Brendan Barber said: 'In recent years some investors have taken their eye off the ball, leaving company executives to run riot with irresponsible business decisions and obscene bonus packages. At the same time, we have seen the damage done to the financial system by the unchecked use of complicated products and practices like derivatives and short-selling.

'These decisions have contributed to the financial mess we now find ourselves in. There has been a huge human cost too with job losses and millions of people seeing the value of their pension funds plummet.

'As we start to rebuild our economy, it's absolutely vital that checks are put in place to prevent a repeat of this irresponsible behaviour. Committing to responsible ownership will help to ensure that investment decisions work in the long term and help rebuild a more sustainable financial system.'

Founder of Hermes Stewardship Services and author of The New Capitalists David Pitt-Watson said: 'The owners of global big business aren't just wealthy tycoons, but ordinary savers with pensions and insurance policies. These turbulent times show how essential it is that these funds are invested responsibly. Pension trustees and the fund managers they employ need to think hard about the ways in which they invest and the impact on the financial system as a whole.'

Chair of the House of Commons Treasury Select Committee John McFall MP said: 'The last few months have shown how we are all affected by the fallout from financial mismanagement and the volatility in the financial system. Getting things back on track means major investors playing an active role in the recovery - asking difficult questions of the companies they invest in about their corporate governance, social, environmental and other risks. This initiative and the PRI show how they can lead the way.'

Chair of the House of Commons Work and Pensions Select Committee Terry Rooney MP said: 'Hard working people saving for their retirement want to know that their pension funds are being invested responsibly and for the long term. People are worried about their jobs and pensions, but their savings can actually have a huge influence. The steps set out in this statement can work in the interest of savers, workers and companies themselves.'

NOTES TO EDITORS:

- The full list of signatories to the joint statement are TUC General Secretary Brendan Barber, Chair of the Treasury Select Committee John McFall MP, Chair of the Work and Pensions Select Committee Terry Rooney MP, Chief Executive of the Work Foundation Will Hutton, founder of Hermes Stewardship Services and author of The New Capitalists David Pitt-Watson, FairPensions Executive Director Catherine Howarth, Ethical Investment Research Service (EIRIS) Executive Director Peter Webster, Pensions Investment Research Consultants (PIRC) Managing Director Alan MacDougall, HERMES Equity Ownership Services Chief Executive Officer Colin Melvin, RSA Chief Executive Matthew Taylor and Head of Responsible Investment at CIS Asset Management Ian Jones.

- The joint statement on institutional investment is available under embargo at www.tuc.org.uk/extras/noharmdonestatement.pdf

- The Principles of Responsible Investment (PRI) is an initiative launched in 2006 by the United Nations Environmental Programme (UNEP) Finance Initiative and the UN Global Compact, with the support of the UN General Secretary. The PRI are a set of six voluntary and aspirational principles that aim to support investors in including long term environmental, social and corporate governance factors into their investment decisions and ownership activity. The PRI now has over 400 signatories, representing $15 trillion in assets. A number of UK funds including the BT, BP, Universities (USS), Environment Agency and several local government pension schemes are signatories. Further info is available at www.unpri.org

- The TUC supports a network of 1,000 trade union trustees. It provides newsletters, events, briefings and training for members of the network and acts as a point of contact and advice for union trustees. The TUC is continuing to promote the issues covered by the statement with its network of trustees.

- All TUC press releases can be found at www.tuc.org.uk

- Register for the TUC's press extranet: a service exclusive to journalists wanting to access pre-embargo releases and reports from the TUC. Visit www.tuc.org.uk/pressextranet

Contacts:

Media enquiries:
Rob Holdsworth T: 020 7467 1372 M: 07717 531150 E: rholdsworth@tuc.org.uk

Liz Chinchen T: 020 7467 1248 M: 07778 158175 E: media@tuc.org.uk
Elly Brenchley T: 020 7467 1337 M: 07900 910624 E: ebrenchley@tuc.org.uk

Press release (1,000 words) issued 19 Jan 2009