The ghost in the machine? | Pensions and Lifetime Savings Association

The ghost in the machine?

08 September 2020

The prospect of Investing for Good is one that we can all buy into. Here, PLSA Chair Richard Butcher, looks at if there is anything holding us back.

One of our key policy priorities this year is Investing for Good. Within that priority I’ve been working on a climate investing project (when I say working, I mean the team do most of the work, whereas I simply chair the meetings and shout ill-informed edits from the side lines). 

To date, we’ve held ten roundtable debates, with more than eighty delegates attending, representing some 60 funds directly and many hundred more indirectly. It’s produced a great and robust body of evidence that will inform our output over the rest of the year and beyond. 

In this blog, though, I want to talk about just one aspect of these round tables. 

One of the striking features of the delegates was that they represented every part of the pension investment chain; from asset owners like me, a professional trustee in my day job, through advisers and providers including asset managers right down to the investable assets themselves. We had a number of meetings with the treasury and other functions of the companies we invest in or lend money to, to find out how they were dealing with the demands of being invested in for good.

And the feedback from all 80 of these people was they want to do good, in the sense that they want to invest in a way that takes account of the impact of climate change on the value of the companies in which they invest. Although we didn’t quite have universal buy-in to the climate crisis, we had one ‘climate change denier’, even he agreed, with the rest of us, to the principle that we should invest to mitigate it as a risk (albeit he thought it a risk unlikely to manifest). 

In other words we had a universal and overwhelming agreement to the need to invest in a climate aware way. 

This led me to two things. 

Firstly, and most importantly, a sense that we will achieve our mission. We will prevail. If we have a universal appetite to do good, there is nothing that will stop us from doing good. This gives me great strength. 

The second was the realisation that the investment chain is unfairly presented. There is no ghost in the machine trying to block the progress of investing for good, motivated, perhaps, by a misaligned incentive or pecuniary interest. There is no ghost in the machine trying to exploit an imagined opportunity to steel a leap on their competitors. There is no ghost in the machine that sees climate change or the risk of climate change as some sort of conspiracy theory that it is their duty to thwart. There are no ghosts in the machine. 

Now that’s not to say there aren’t systemic challenges that slow or can even halt progress, there are, but where there are they are caused by “cock up not conspiracy” – the accidental but benign development of different systems and processes over time. 

If we ask for a bit of data, the inability to provide it is not an attempt to thwart us, but simply because no one has ever asked for or collected that bit of data and so the system cannot provide it. These things, though, can be worked through with time (if you want evidence of this look no further than the asset managers’ response to data requests using the new Cost Transparency Initiative templates) particularly with the overwhelming will to do good. 

We can do this. I am hopeful. 

You’ll see our output soon, but one last thought. At the risk of bringing you down from the high the previous paragraphs will have hopefully induced – there are other challenges and the most significant of these are out of the pension investment chain. Our biggest challenge will be influencing others to change as much as we must ourselves.

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