Responsible Investing of Pension Assets: Links between Framing and Practices for Evaluation

Abstract

Despite the increase in the acceptance of responsible investing (RI) in general (Allianz, in www. allianzglobalinvestors.com, 2010), the global community is still witnessing unprecedented levels of practices that can only be categorized as ''unsustainable''. It appears, then, that either the inroads made by the RI community have not kept up with the increase in unsustainable practices, or, that the RI process itself has been ineffective at producing meaningful change. The current study aims to investigate the practices used by pension plan sponsors to determine how they may enable, or interfere with, the adoption of implementation of RI. We adopt Framing Theory (Benford and Snow, Annual Review of Sociology 26: 2000), specifically the idea that particular frames find alignment when they resonate with their targets, by either bridging, extending, amplifying or transforming a domain. We extend research to include understudied practices by performing an analysis of 60 public pension funds in Canada. We find evidence of disconnect between the financial frame which dominates practices for compliance and evaluation, and the social frame of RI as a source of change. If the aim of RI is to produce long-term change, then a consideration of whether it aligns with extant practices is critical. We discover a variety of frame alignment tactics already employed in practice. We also find that, even within the dominant financial frame, opportunities for frame extension, amplification and transformation do exist, and examine how these are more (or less) possible depending on how the asset management structure is designed.

State Pension Funds and Corporate Social Responsibility: Do Beneficiaries’ Political Values Influence Funds’ Investment Decisions?

“…Finally, public pension funds' propensity to tilt their portfolios towards CSR might be unrelated to any relational or moral factors. Instead, the funds might consider the incorporation of CSR factors as a pure investment strategy to improve funds' portfolio performance in line with findings in the literature that institutional investors and pension funds in particular predominantly focus on the financial impact and the 'business case' of responsible investment (e.g., Petersen and Vredenburg 2009;Himick and Audousset-Coulier 2016). This channel is based on instrumental motives and is termed the "pure financial motives" channel.…”

“…12 As such, public pension funds' responsible investment practices would be purely instrumentally driven as funds considered positive CSR screens as a means to realise superior investment outcomes (Aguilera et al 2007). For instance, Himick and Audousset-Coulier (2016) analysed the statements of investment policies of 60 Canadian public pension funds and show that the financial frame of responsible investment dominates the social frame in funds' investment policies as funds' primary 12 Survey evidence suggests that the two top motivations of institutional investors for considering CSR factors are improving returns and managing risk. Furthermore, Anne Simpson, Senior Portfolio Manager and Director of Global Governance of CalPERS justifies CalPERS's responsible investment strategies by citing the fund's investment belief that "environmental, social and governance factors can affect the risk and return performance of investment portfolios to varying degrees across companies, sectors, regions and asset classes".…”

Corporate sustainability and institutional shareholders: The pressure of social responsible pension funds on environmental firm practices

“…Although no prior works specifically analyse this question, as far as we know, several studies find that firms with further ESG practices may increase firm value, generate customer loyalty, or increase productivity (Carbone, Moatti, & Vinzi, ; Deng & Xu, ; Jo & Na, ; Pucheta‐Martínez & López‐Zamora, ; among others). Conversely, firms with inferior ESG procedures are less profitable in the long term (Himick & Audousset‐Coulier, ; Vitols, ). Additionally, an extensive literature finds that pension funds achieve more efficient investments and improve market capitalization (Davis, ; Hu, ; Meng & Pfau, ; Vittas, ).…”

"Environment, Social and Governance (ESG) criteria and preference of Managers"

“…Companies that avoid sending short-term messages have a better chance of attracting investors with long-term perspectives. If the aim of responsible investment is to produce long-term change, then a consideration of whether it aligns with extant practices is critical (Himick & Audousset-Coulier, 2016). Fund managers may wish to invest for the long term, but are pushed towards managing against shorter term goals since that is the basis upon which their performance is measured and assessed (Lenssen, van den Berghe, Louche, & Guyatt, 2005).…”