reprint of our April 3, 2018 editorial published originally by Financial Times Pensions Expert (FT Px)
Last year saw the unravelling of the prevailing order that had dominated the world economy since 1946, yet pension trustees feel empowered to flex their fiduciary muscles, if necessary going against their government’s views.
On the heels of the Brexit vote, the abrupt eviction of Italian prime minister Matteo Renzi and Donald Trump’s election as US president, came the implosion of France’s political system and upset victory of Emmanuel Macron.
The year ended with the attempted secession of Catalonia and the rapid disintegration of Italy’s political order.
And yet, institutional investors ‘never had it so good’: pension funds returned 10.5 per cent on average in the UK and Canada. This stood at roughly 7 per cent for Holland’s top 10 schemes; and ATP, Denmark’s largest pension scheme, posted a 29.5 per cent return.
But that wasn’t the only pension paradox for the period.
The world’s largest asset owners, US public pensions, doubled-down on their sustainable investment push precisely when the federal government was stepping out of the Paris agreement.
Rising bipartisan support for environmental, social and governance factors from Sacramento, CA to Trenton, NJ seemingly marked the emancipation of the pension investment sphere from short-term political noise.
Tellingly, Tennessee’s Consolidated Retirement System, the $50bn (£35.5bn) pension scheme of one of America’s most staunchly conservative states, jumped on the green finance bandwagon while also increasing its exposure to Korea as the White House was threatening “fire and fury”.
Chairing the World Pensions Forum held in Paris last month, I was delighted to hear, more than ever before, many UK and European trustees speak enthusiastically about flexing their fiduciary muscles for the UN’s Sustainable Development Goals, including SDG5, and to achieve gender equality and empower all women and girls.
Joaquim V Levy, chief financial officer of the World Bank Group, sounded a global note of encouragement about matching more long-term investment flows from northern hemisphere asset owners with the economic development needs of emerging markets and developing economies.
And Bertrand de Mazières, director general of finance at the European Investment Bank, spoke enthusiastically about the unprecedented “thirst for green bonds and ESG-informed investments” he was witnessing.
Perhaps Harold Macmillan was right after all: humanism and capitalism can be reconciled.