Will plugging the hole in the ozone layer fix the hole in your scheme funding?

30th September, 2011

  • Chris Roberts of Dalriada Trustees considers envrionmentally sensitive investments and whether ‘going green’ is really a viable funding option.  

    I was reading a recent article highlighting a report by “Forum for the Future” pushing for major investors such as Pension Schemes to use their collective “financial muscle” to push greener investing.  The argument being that as the environmental conditions worsen financial returns will be greatly diminished!

    Am I the only one thinking if our planet is on the verge of imploding, financial returns would not be my number one concern?  The resultant change in mortality assumption to age would ensure all defined benefit pension schemes ending with a massive surplus!  Although I am sure the last surviving government Actuary would argue this point, even with solar rays firing down in the background in a Spielbergesque (yes that’s a word) vision.

    The suggestion was made that as pension contributions receive tax relief the Government have a duty to encourage pension schemes to “go green”.  Whilst I fully support the notion, in the reality pension schemes are hard enough to fund without limiting the investment powers of a Trustee Board.  It is like asking Mr Muscle (famous for loving the jobs you hate) to do a charity run up Everest with a back pack filled with the full weight of Actuarial funding requirements (estimated to be about 700 metric tonnes).

    Perhaps the government could provide incentives for the environmentally friendly scheme Trustee.  What about a 10% reduction on PPF levy for every 1000 trees planted?  Or a reduction on Actuarial funding requirement for any employer with solar panels strapped to the roof?

    Not the most serious of suggestions but in my opinion any restriction on Trustee investment options must be mitigated by some form of easement on the schemes financial burden.

    I sympathise with agencies such as Forum for the Future but whilst pension professionals will (probably) never fully understand the difficulties faced by the environment, environmental companies will never fully understand the difficulties faced by a Pension Scheme Trustee.

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