The future of investing for pension funds - Social impact investing and a sustainable future - Pensions for Purpose, sponsored by Big Society Capital

UK pension funds are pushing the boundaries in social impact investing.

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... Foreword from Charlotte O'Leary, CEO of Pensions for Purpose

Why don’t all pension funds look at the environmental and social impact of their investments and act on them?

It may seem counterintuitive given what we understand now about climate change risks and social injustice. However, quantifying environmental and social impacts has been difficult historically because of inadequate data leading to the classification of these risks as non-financial. Cultural and legal issues persist around fiduciary duty in this area, despite legal papers dispelling these myths.

Despite this, many pension funds are making impact investments because they recognise the shift in transparency on data such as companies' carbon emissions, changes in consumer preferences and regulation. They know that these risks are not adequately priced into the market and that because they have long time-horizons and a fiduciary duty to provide a secure income to their members in retirement they are particularly susceptible to these risks.

While many of those pension funds are focused on environmental impact, they recognise the inability to meet those climate targets without a just and fair transition. That means taking into account social impact. After all, how can we transition to new vehicles, infrastructure and heating systems without the investment to allow all members of society to do so?

I am so pleased to be a co-author of this report demonstrating that pension funds are innovating and pushing investment boundaries in social impact areas that we may not have been aware of. But we also recognise that there is a lot more we can do to highlight not just the risks but also the significant opportunities in social impact investing.

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