Impact investment can help pension fund managers invest in areas that their members care about. These are investments that have the intention of creating positive impact on society and the environment whilst generating sustainable financial returns. For Defined Contribution schemes, impact investment offers a powerful tool for engaging members by helping people see the good that their money can do today. When empowered with this knowledge, young people in particular are likely to invest earlier in life; providing an additional positive impact of improved financial security in the future.
Cushon, winner of the Pensions for Purpose 2021 Social Impact Award for Pension Funds
One pension scheme that has tapped into the opportunity impact investing offers is Cushon. We were delighted to see Cushon win the Social Impact Investment Award, an award we had sponsored at the Pensions for Purpose Annual Impact Awards. Cushon is on a mission to disrupt the workplace pension industry and in January 2021, announced itself as ‘the world’s first Net Zero Now’ pension. Through ‘The Cushon Sustainable Growth Investment Strategy’ the scheme makes climate-driven investments in wind and solar farms, forestry, battery tech, green hydrogen, climate insurance and social housing. Beyond environmental projects, Cushon’s strategy also seeks social impact through investments in sustainable infrastructure projects in low- and middle-income countries to improve access to telecoms, education and medicine.
Cushon demonstrate integration of social impact throughout their investment process with:
- A stated social impact objective with defined investment specific social outcomes and a clear focus on investing to reach the most excluded people in society.
- Clearly structured asset allocation to help achieve their impact objectives which includes 15% in private markets where we believe the most social impact can be achieved.
- Commitment to impact reporting, including reporting on the Sustainable Development Goals and where possible, aggregate fund-wide social impact data points.
Photo credit: Ian Tuttle
How pension funds can get started with impact investing
Impact investing offers pension funds a powerful opportunity to connect with members and have an impact on society and the environment whilst generating sustainable investment returns. Pension funds looking to start making impact investments have a number of great resources that they can look to for guidance. One resource designed to help is Impact Investing Principles for Pensions which sets out the following four principles:
- Set impactful objectives: establish and incorporate ‘impact objectives’ as part of your pension scheme’s statement of investment principles (SIPs) or policies, which can be explained to your members and are designed to serve the scheme’s purpose.
- Appoint investment consultants and managers with impact integrity: identify and appoint investment consultants who are aligned with your investment beliefs and objectives, and fiduciary and/or investment managers who can achieve your scheme’s impact objectives through their investment and stewardship activities.
- Use your voice to make change: progress your impact objectives by formulating stewardship guidelines for your, or your investment manager’s, voting and engagement activities.
- Manage and review your impact: monitor progress against your impact objectives by identifying relevant indicators and benchmarks, assisted by your investment managers.
If you’d like to find out more about how pension funds can get involved in social impact investing, please get in touch.