FairPensions' annual guest lecture is an exciting event which invites distinguished panelists and members of parliament, the press and the public to meet and discuss the issues of responsible investment.

2011 | 2010 | 2009

"Can Pension Funds Shape the Future of Capitalism? Yes, we can!"

FairPensions Guest Lecture given by Professor Keith Ambachsteer, Director of the Rotman International Centre for Pensions Management

6.30pm, Wednesday 16 November 2011 in the Grand Committee Room, Parliament

Professor Ambachtsheer, who has worked in pensions and investment since he left the Canadian Armed Forces in 1968, told a packed Grand Committee Room of his belief that pension funds can and must shape the future of capitalism:

"Can pension funds shape the future of capitalism?" he asked. "Yes we can". He answered.

Professor Ambachtsheer noted that capitalism, which allowed for a 2000% increase in global per capita GDP in the 19th and 20th centuries while reducing the number of hours people worked, is now facing ‘strong headwinds' which threaten to blow it off course. These ‘headwinds', such as an aging population and environmental limitations, can be addressed by the $30 trillion global pension fund sector because it has a fiduciary duty to invest across generations. These pension funds are obliged to place as much focus on their 20 year old workers as those approaching retirement and this, according to Professor Ambachtsheer, means they have the motivation to move capitalism towards a more sustainable and wealth creating form.

Unfortunately the current pension fund situation means that we are still a long way off the dream of them shaping capitalism for the better. Professor Ambachsteer said that both defined contribution and defined benefit schemes are problematic. He then went on to point out a number of failings of current pension funds such as the multitude of layers between agents involved in each fund, trustees' lack of understanding of their role, the small size of many funds and the cost of external investment managers.

The time has come, according to Professor Ambachtsheer, to open up a second front in the transformation of pension funds and move towards a long horizon focus in our pension saving:

"We must develop strategies to move from saying to doing at a faster pace" he said, before pointing to examples of successful schemes such as PGGM in The Netherlands and the Ontario Teachers' Pension Plan.

Professor Ambachtsheer closed his speech by painting a vision of a better future thanks to pension funds: "Imagine thousands of investors...all consciously acting as active owners of the thousands of corporations they have invested in. We would transform the headwinds of capitalism into a more sustainable, wealth creating version."

After the main speech Mark Fawcett, Chief Investment Officer at NEST, said that long-term thinking was in his organisation's DNA, which Professor Ambachtsheer welcomed. Then followed a lively Q&A as voices from across the pension world and beyond gave their opinions on the ways in which the industry must change to meet the needs of future generations.

We thank Keith Ambachtsheer and Mark Fawcett for their insights.

The full text of Professor Keith Ambachsteer's speech is available here.

Avoiding the Next Crisis: Challenges and Solutions for Mainstreaming Responsible Investment

FairPensions Guest Lecture given by Anne Simpson, Head of Corporate Governance, CalPERS; with a response by Lord Myners, former Financial Services Secretary.

6.30pm, Tuesday 23 November 2010 in the Grand Committee Room, Parliament

The event began with a brief welcome from Jon Cruddas MP, a long-standing supporter of FairPensions and our official Parliamentary host for the evening. Subsequently Catherine Howarth of FairPensions introduced Anne's lecture, emphasising the historical lack of attention paid by civil society organisations in the UK to what goes on in the financial services sector, not least in the investment industry. She pledged that FairPensions' will work with fellow organisations in civil society to build-up the sector's capacity to promote positive change in the structure and culture of pension investment.

Anne Simpson's lecture focused initially on her analysis of the key barriers to responsible investment. She then drew out different ways in which the CalPERS fund is addressing those multiple challenges. Anne posited that if actors in markets were to behave rationally there would only be responsible investment. In practice, the complex and opaque nature of many global markets significantly undermines responsible practice in the industry. Furthermore, pension funds' increasingly diversified portfolios result in a fragmentation of power among multiple agents, undermining collaborative action to deliver more responsible and sustainable investment strategies.

Anne's main advice to the Responsible Investment movement is to engage more actively with the mainstream part of the global investment industry. Anne finished her lecture by asserting that the financial crisis had made responsible investment an imperative for CalPERS. In her view more effective implementation of Responsible Investment ought to help prevent another traumatic crash in global financial markets.

In responding, Lord Myers concentrated on the concept of ownership. Although pension trustees are the real owners of assets, the lack of transparency in global markets creates an environment of "ownerless corporations". He argued that the best way to encourage investors to behave like owners is to move to an investment model which measures performance over a far longer period of time whilst adopting more concentrated portfolios of assets.

A lively series of questions was asked by audience members, in many cases challenging the arguments presented by Anne Simpson and Lord Myners. Issues raised included the lack of government intervention in the banking sector; the 'impossible' role of trustees; investment in the financial sector to the detriment of manufacturing; and the practical difficulties of introducing a more long-term investment approach. The session finished with a vigorous debate between Lord Myners and Anne Simpson on valuing portfolios on the basis of market prices. This ended, happily with the promise of continued discussion between the two at the well-attended reception following the lecture.

The full text of Anne Simpson's speech can be found here; for Lord Myners' response click here; and a full transcript of the questions is available here.

Pensions, Profits and Principles: Towards a Sustainable Financial System

FairPensions Guest Lecture given by Roger Schjerva, State Secretary, Ministry of Finance, Norway.

6pm, Monday 26 October 2009  in the Grand Committee Room, Parliament

Jon Cruddas MP, who hosted the event on behalf of FairPensions, introduced the event, reflecting on the current debate about the role of institutional investors in protecting against or precipitating the financial crisis. This was followed by an introduction from Catherine Howarth (CEO), who emphasised the Norwegian Pension Fund's record for coupling a strong position on investment ethics with impressive financial returns: an example that UK pension funds can learn much from.

Mr Schjerva's speech began by noting how, in the aftermath of the recent economic crash, stable financial markets are crucial for us all. These are best achieved through transparency and proper regulation, combined with an investor focus on long-term horizons that respects the overlap between environmentally and financially sustainable growth. Norway manages its pension fund with these requirements in mind- and does so with considerable success: by the end of 2011, its market value is expected to reach almost $550bn (US).

Norway's pension fund (NPF) is a universal owner, investing in almost 8000 companies worldwide. Yet as Mr Schjerva highlighted, the Norwegian approach differs from most others in its explicit recognition of an enlightened self-interest to uphold responsible corporate practices across the global economy, so as to ultimately yield strong and sustainable financial returns. As Schjerva put it, "the goal of financial return is closely linked to that of being an ethically responsible investor." As a result, Norway's fund management strategies draw upon the power of active ownership to influence investee companies positively; whilst, in a minority of cases, exclusion strategies are also employed where risks may be too high to invest, or it's not possible to influence a company's unethical behaviour otherwise. These decisions are directed by Norway's Ministry of Finance, closely informed by a wider body of expertise from the field: representatives from Norges Bank and an external Council of Ethics. The fund has recently committed to resourcing a research project on investor risk in the face of climate change at LSE's Grantham Institute on Climate Change and Environment, chaired by Sir Nicholas Stern.

Mr Schjerva finished his speech by offering an answer to the following question: should all investors take on the same responsibility as the Norwegian government pension fund does? Whilst acknowledging this as a complicated question with no easy answer, ultimately, he pressed that a notion of ‘enlightened self interest' can only lead us to respond with a ‘yes' on this matter. In pursuing a sustainable strategy of responsible investment, we must strike a balance that marries both Friedman's mantra that ‘the business of business is business,' and the ideal that ‘doing well is the result of doing good' (Ralph Waldo Emerson).

Mr Scherva's speech was warmly received by everyone present, as reflected by subsequent votes of thanks from Nigel Waterson MP and David Pitt-Watson. Waterson stressed the strength of Schjerva's argument from the perspective that its focus on long-term sustainability spoke sound and welcome financial sense; while Pitt-Watson praised the Norwegian approach for its prudence in considering future climate change risks to the economy. As Pitt-Watson put it, we can and we will recover from the financial crisis, but the same cannot be said of the environmental crisis, which requires responsible management and a long-term investment mindset.

The event concluded with a question and answer session. Representatives from a diversity of organisations participated: Oxfam, The Financial Times, Merrill Lynch and the DWP. The questions also covered a wide scope of topics: whether hedge funds could be viewed as a ‘responsible' investment choice; the extent to which international collaboration exists between the Norwegian scheme and other asset owners; and whether the scheme recommends strategically investing into a company to leverage greater influence over it. The conversation continued for some hours in St Stephen's Tavern on Bridge Street under the watchful eye of Big Ben.

Subsequent press coverage has been encouraging: Ruth Sullivan of The Financial Times provided the first article ("Eat your heart out" 27/10/09); Jonathan Williams of IPE.com has written two pieces ("Norway-Global to plough €400m into carbon capture" 29/10/09, and "Tories push for ethical fund in personal accounts" 29/10/09).

Read Mr Schjerva's speech in full.