Tuesday, 15 April 2008

Interview with UNPRI chair

There's an interview with Donald MacDonald, chair of the UN Principles for Responsible Investment and member trustee on the BT pension fund (and ex-CWU officer), on the SHARE website here. I've just pulled out the union-specific questions below.

3) The international trade union movement has come out in support of PRI, and developed a guidance note to assist trustees in implementing them. As a member-nominated trustee yourself, how do you view the role of the labour movement relative to the PRI?

We welcome the support of the global labour movement – and the worker capital it represents. This support is clearly very important: Trade unions have an obligation, through their member-nominated trustees, to deliver best value pensions but also to exercise active ownership. The relationship between capital and labour has evolved considerably in the pensions sector, and a very collaborative approach now exists. It is very important that workers and their representatives are actively involved in the good management of their pension schemes. We invite trade union pension schemes to take part in the good work of the PRI.

4) Do you think that PRI is a useful tool for member-nominated trustees to raise issues of importance to workers and their trade unions related to the investment of workers capital?

Clearly, PRI provides a useful framework for trustees: there is a commonality of interest here. Consider the universal ownership issue: the health of workers’ pension funds depends on healthy economies, avoidance of wars, the secure production of foodstuff, access to clean water, etc. There is a circular relationship between investments and the globe: if the world is unhealthy, our pensions are unhealthy. Trade unions have a very unique role in this respect: Trade union members are the beneficiaries of pension funds but also supply the labour that manufacture goods and provide services.

The PRI can be used as a vehicle for corporate engagement in many areas of interest to the labour movement, such as supply chain issues, gender, labour rights, etc. PRI signatories, in turn, need to be aware of their responsibilities in areas of key concern to workers, such as labour rights, health and safety, child labour etc.

5) PRI’s lack of explicit reference to authoritative international standards of corporate behaviour (ILO, OECD) is frequently mentioned as a drawback in trade union circles. How do you respond?

The ILO and OECD instruments are of a different nature: they are, by nature, inter-governmental organizations mandated to set standards that are enforceable through legal action. PRI is different: it is an investor-led initiative. Members are motivated by the proper exercise of fiduciary responsibility, by the belief that ESG risks can be material, and can impact the long-term returns for members’ beneficiaries.

To be effective and raise standards in the capital markets, you have to be pragmatic. PRI pushes for the integration of ESG considerations in investment decision-making. Given the wide range of extra financial issues out there, this process has to be generalized and indicative to be valuable for asset owners. The Principles are clearly aspirational, but underpinned by a clear assessment process.

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