UK - The UK government has rejected amendments forcing the Personal Accounts Delivery Authority (PADA) to take account of the UN Principles for Responsible Investment (UN PRI), because personal accounts should not "set an example" for other schemes.

The amendments, supported by both the Conservative and Liberal Democrat opposition parties, required PADA to "have regard to" the UN principles and make adherence to them part of the contractual arrangements with fund managers.

In particular the amendments sought PADA to pay particular attention to:

•    addressing environmental, social and corporate governance issues in investment policy statements
•    assessing the capabilities of internal and external investment managers to incorporate such issues
•    asking investment managers to report on their engagement with such issues
•    including UN PRI requirements in requests for proposals
•    aligning investment mandates, monitoring procedures and performance indicators with the UN principles 

However, Mike O'Brien, minister for pensions reform, argued: "If the principles would oblige this particular pension scheme [personal accounts] to apply the principles, would they oblige all other pension schemes to comply with them?"

In his response to the debate, O'Brien argued that by accepting the amendment, it would effectively "rewrite much of trust law", and questioned whether opposition parties wanted to extend the obligation further. "Why not all public sector pension schemes - why not all private sector pension schemes?" he added.

Instead, O'Brien said the government had taken the view that "the principles are very worthwhile, but it should be a matter for the trustees to consider, for each individual pension scheme, whether they wish to apply them".

"We will not force pension scheme trustees to adopt them. We are happy to say to those who are setting up personal account schemes that they should consider the principles," said O'Brien.

He pointed out that Tim Jones, chief executive of PADA, had confirmed that the organisation's consultation on investment - scheduled for publication later this year - would "address the issue of responsible investment", although Jones added that ultimately it would be "the responsibility of trustees".

In addition, O'Brien argued in Parliament that signing up to UN PRI would require active management of funds, which is "more expensive than passive management" and warned it "must be for the trustees to decide whether the additional costs are in the members' best interests. Otherwise, we will effectively be telling the trustees that they must manage their funds in a particular way".

The minister also claimed that it "would be wrong to argue that the scheme should be used to set an example to other companies or pension schemes", as he said personal accounts are "not the right instrument to express Parliament's general views on investments".

Instead, he highlighted that "the law already requires the trustees of all occupational pension schemes to state the extent to which social, environmental and ethical considerations have been taken into account in their statement of investment principles", and confirmed that the legal requirements "will apply to the trustee of the personal accounts scheme just as they will in any other scheme".

But although opposition spokespeople were not convinced by O'Brien's arguments, which were described as "wholly inadequate and bad-tempered", a vote of MPs resulted in the amendments being rejected by 290 votes to 173.

If you have any comments you would like to add to this or any other story, contact Nyree Stewart on + 44 (0)20 7261 4618 or email nyree.stewart@ipe.com




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