Cameron Rose: Pension investments spark ethical concerns

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CHOOSING where to put money for the best return should not be swayed by a single-issue campaign, says Cameron Rose

THE pensions we look forward to need to be paid for. In the case of many public employees relying on the Lothian Pension Fund, their monthly pension contributions are supplemented by a larger payment from their employer. The £5 billion fund is used to pay pensions and the surplus is invested to ensure there is sufficient in the pot to pay pensions over a long period of time.

There are from time to time political campaigns from pressure groups to try and prioritise an issue favoured by the special interest group. One such campaign, reported on Friday, is the call to disinvest from companies involved in the arms trade.

War is self-evidently a terrible thing. The current campaign tries to tap into that sentiment, but a closer look at what is being proposed shows a single issue campaign which is uninformed as to how Lothian Pension Fund already deals with ethical issues.

The key focus of a pension fund is always to pay its’ members’ pensions. Disinvestment may salve the consciences of a few interested campaigners, but the prospect of that act saving lives or preventing war is remote.

Companies producing weapons usually make a wide range of other goods. Distinguishing investments thought by some to be “illegitimate” is no easy matter. Just as an army builds bridges and provides aid, so weapons can also be used for constructive or life-saving purposes. In any case, investment withdrawal from a particular company will usually make no difference to the horrors of war, as other investors may step in.

Secondly, only a small minority believes the use of force should be banned unilaterally. Most believe the maintenance of freedom requires defence. Whose ethics are to be followed? The bulk of pension fund members would not be happy to see the security of their pensions subject to the vagaries of a single interest pressure group.

Thirdly, the campaign shows no regard to the principles of responsible investment already followed by many investors and pension funds.

There is much work already done to encourage responsible investment. The strategy is usually through engaging with the company, rather than disinvesting. This covers a wide range of issues and is done to ensure companies are responsible and provide good returns.

Details of this are publicly available on many pension fund websites, including the Lothian Pension Fund.

There are issues to be debated. But the current campaign and its supporters would benefit from an awareness that consideration is already being given to these issues, that responsible investment has long been on the agenda – and that investment decisions deal with complex issues.

Those responsible for the funds always need to prioritise securing the pension for the members they represent.

• Councillor Cameron Rose is a trustee of two pension funds and a member of the Lothian Pension Fund. He writes in a personal capacity.