Trustees need to fight for members on climate change

30 Apr 2021

Rory Murphy is the chair of trustees at the Merchant Navy Officers Pension Fund.

Pension trustees should be an effective conduit between their scheme members – the true asset owners – and the managers and advisers who are paid to invest their money. They should be driving the best possible deal with managers on their members’ behalf, and in a way which best reflects the interests of the asset owners.

At the same time, they should be keeping their members informed, in a transparent and accessible way, about where and how their money is being invested, and how well those investments are performing. So far, so good.

But in practice, is that really happening? As a chair of trustees myself, I have no doubt as to the motives and intentions of trustees, who are, in my experience, people of the utmost integrity, who give their time and expertise to secure the best possible outcomes for their members.

Nor am I suggesting that the investment industry is populated by unscrupulous cowboys intent on making a quick buck by ripping off credulous pension savers. The problem, I believe, is that the lines of communication between asset owners (the scheme members) and managers are often blocked, and that trustees are usually the unsuspecting cause of the blockage.

Research from the PLSA reveals that four out of five UK consumers see climate change as important, and more than two thirds think pension schemes should be transparent about the extent to which they invest in a climate aware way.

But while two in three thought investors had a responsibility to encourage investee companies to behave in a climate-aware way, only one in five pension savers (22%) said they knew the types of companies their pension is invested in.

So, there is clearly an appetite among pension savers for transparent, accessible information about how their money is being invested, and a strong sense that it should be used to support well-run, sustainable companies.

This groundswell of opinion is at the heart of Make My Money Matter, a bold new campaign which is, in its own words, “fighting for a world where we all know where our pension money goes, and where we can demand it’s invested to build a better future”.

Unlike other similar campaigns, this one is spearheaded by people from beyond the pensions and investment industries, notably writer and film director Richard Curtis. This gives it a fighting chance of reaching consumers who have remained impervious to earlier, industry-led attempts to engage them in how their pensions are managed and invested.

Growing awareness among scheme members for a sustainable, climate-aware approach to investing their money puts further onus on trustees to acknowledge and act on that sentiment, but be more insistent and effective in pressing the issue in their dealings with the investment industry.

Despite the efforts of politicians, regulators, advisory bodies and others, there remains a persistent sense that the relationship between pension fund trustees and their investment advisers and managers is, shall we say, “cosy”.

However well-intentioned the trustees, and however accomplished the managers, too often this can be a one-way relation- ship. Managers provide investment “solutions” that do not necessarily reflect those of the trustees or the consumers they act for. And perhaps that is not surprising given the complexities trustees have to grapple with and the fact that they probably do not really know their members views.

As a result, investment managers are not always providing services which best reflect the interests of their end consumers, while pension savers have little or no understanding of, or engagement with, the investment of their money.

This situation is unacceptable. In most other sectors of the economy, consumer demand would have long since swept away providers of goods or services that people do not want, or who obfuscate the benefits provided.

The sticking point in our industry lies primarily with trustees. We need to step up.

Which means being better informed of members views, clearer and more responsive to our members’ demands on issues like sustainability and climate change, and more willing to hold the investment industry to account in meeting those demands.

If we fail to meet this challenge, neither current pension savers nor future generations, will forgive us.

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