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Some of the UK’s biggest pension funds have pushed back against Labour MPs calling for defence companies to be categorised as “ethical” arguing that investors deserve choice and should be able to exclude weapons makers from their portfolios if they choose to.
Nest and People’s Pension, the UK’s two largest multiemployer defined contribution pension schemes with a combined £83bn of assets, told the Financial Times they were not considering adding arms companies to their “ethical” pension options, despite pressure from Westminster.
“We think it’s important that members who don’t want to invest in armaments have the option not to,” Mark Fawcett, chief executive of Nest Invest, told the FT. Nest manages £50bn of savings for 13mn people.
The People’s Pension, which manages £33bn of retirement savings, echoed Nest’s stance and signalled it would continue to exclude companies involved in the production of weapons in its ethical fund.
“The ethical fund is designed for members who don’t want their savings invested in certain sectors, including defence,” said a spokesperson for the fund.
The comments came after 100 Labour MPs and peers last week called on British banks and pension fund managers to stop labelling defence investments as “unethical” in an effort to boost the UK’s domestic arms industry.
“There can be no more ethical investment than giving the Ukrainian people every ounce of support that can be mustered by their allies,” they said in an open letter.
The letter called for the removal of environmental, social and governance (ESG) investment requirements that “often wrongly exclude all defence investment as ‘unethical’”.
The letter urged financial institutions “immediately to sweep away ill-considered anti-defence rules which are acting as a barrier to doing what is right”.
Both Nest and People’s Pension said the vast majority of their members were in their default funds, which do invest in defence companies, but exclude makers of certain weapons such as landmines or chemical weapons.
Labour MP Luke Charters, who helped organise the letter, said they were calling for “a change of attitudes across the fund market”, but agreed that individuals should have options not to invest their private pension in arms manufacturers if that was their individual preference.
Royal London, which has one of the most established sustainable investment fund ranges in the UK with £12bn of assets, also told the FT the exclusions for armament manufacturers would remain.
“Where customers are looking to avoid investments in specific sectors or industries, we offer funds to meet their requirements,” it said, adding that the sustainable investment range represented a small portion of its £173bn under management.
Despite their desire to protect consumer choice, UK fund managers are generally in favour of supporting the defence sector.
Mike Eakins, chief investment officer of Phoenix, the UK’s largest retirement and savings provider, said that “long-term asset owners . . . should be investing more in defence”.
The UK government is exploring plans to encourage Britain’s largest pension funds to invest more in defence as part of the next stage of the voluntary “Mansion House” compact, according to people familiar with the situation.
The accord, signed by 11 pension funds with hundreds of billions of pounds of assets in their combined default funds, is due to be updated this summer.
https://www.ft.com/content/cc39c443-ce24-48b0-ba4a-7b6b0a77508f
