CHASM seminar: Social investment in pensions

On Tuesday 10 January 2017 CHASM held a research seminar in London on social investment within defined contribution pensions, supported by the Law Commission and hosted by CHASM Core member, Dr Paul Cox.

In 2016, the Cabinet Office’s ‘Inclusive Economy Unit’ requested that the Law Commission consult publicly on the topic of investment by defined contribution (DC) pension plans in social investment enterprises and programmes.  Currently, some DC pension plans offer ethical fund options that an individual member can invest in, but none invest in, or offer, social investment on behalf of members.

The predominant investment industry view is a long list of potential problems and barriers to social investment.  With the aim of providing a balance of views, the Law Commission asked CHASM if we’d be interested in organising a seminar that gathered a group of informed people who could provide a variety of other perspectives on the issue. 

The seminar was held at the National Employment Savings Trust (NEST), the UK Government established DC pension fund to meet workplace pensions’ auto-enrolment.  The Cabinet Office and Law Commission attended, and the Law Commission also presented.  The seminar was attended by investors, think tanks, academics, trade bodies, and research organisations.  Twenty-two seminar participants attended in total. 

Social investment enterprises and programmes aim to provide investors with a return on capital for investments that have positive welfare and societal outcomes, such as social housing, re-employment enterprises, education, re-development and socially useful infrastructure.

The primary focus of the seminar was the financial investment side of such programmes rather than their delivery.  The financing would be achieved by a small part of workers’ and employers’ contributions into workplace DC pension funds seeking an appropriate mix of risk and return through investing in social investment enterprises and programmes. 

The seminar comprised a total of eight presentations, followed by a long discussion and debate.  The Law Commission will publish its findings from the consultation in Spring 2017 and the Cabinet Office will take forward accordingly. 

Topics at the seminar addressed:

• Barriers to pension funds undertaking social investment
• Barriers relating to issues of law and regulation.
• Is the size of funds a major issue to undertaking social investment?
• The proportion of people taking-up ethical DC pension funds, and the sort of returns they provide.
• How far current DC investment options meet the needs of savers.
• Whether a greater range of options encourage greater engagement with pension saving.
• Whether options seeking social impact as well as financial returns encourage engagement by members of DC pension plans.
• Demand for social investment across age groups, including Millennial’s.
• Supply of social investment opportunities for DC pension plans.
• Whether there are sufficient investment opportunities to provide both social impact and market returns.
• Whether social investment may partly address concerns about people not saving enough through their pension.
• How financial advisers can best explore their clients’ social motivations, and present social investment options in a way that is clear, fair and not misleading.
• Whether social investment options should be labelled or described in a standardised way.
• Whether standardised labels would be possible given the range of funds which might be regarded by different groups, or in different contexts, as social investment.

More details can be found at the Law Commission Website 

Presentations

Engaging young adults through social investment in pensions (PDF)
Daniela Silcock, Head of Policy research, Pensions Policy Institute

DC pensions and social investment (PDF)
Camilla Parke, Strategy and Marketing Development Associate, Big Society Capital

Pension funds and social investment (PDF)
Tamara Goriely and Lucinda Cunningham, National Employment Savings Trust

The analyst's view (PDF)
CHASM, University of Birmingham

Social investing: the member prespective (PDF)
Janette Weir, Ingnition House