Re-evaluating pensions

The link between the BP oil spill and British pension funds has got me thinking that maybe it’s time to reflect on where our retirement funds come from, and whether we should look at re-investing.

A couple of years ago I wrote a story about Aberdeen Asset Management launching a series of socially responsible investing funds in the Netherlands.

SRI funds, as the name suggests, look to make returns through investing ethically or socially consciously.

For example, they would not be invested in munitions factories or companies with poor human rights records. Instead they focus on areas such as green energy and social justice.

I was told that SRI funds had gained popularity in the Netherlands following a documentary entitled ‘The Clusterbomb Feeling’, which aired in March 2007.

The programme revealed that several Dutch pension funds had been investing in cluster bombs, land mines and companies that were guilty of child labour.

The revelations shocked the Dutch public and put pressure on pension funds to re-assess their investments.

I think perhaps Britain needs to have its own cluster bomb moment. Most people do not know where their retirement money is coming from and if they did, then they maybe put off from following a specific plan.

Also, as this environmental disaster unfolds and BP faces increasing pressure to halt dividend payments to shareholders, it now seems like the right time to look to greener companies.

British pensions are heavily invested in BP which poses a problem for people if dividend payments are frozen because they will not receive retirement contributions from the company.

If dividends are stopped, it could have a detrimental effect on individuals getting ready to retire amid concerns of a double dip recession and tax rises.

Add to this the fear of oil running out and fossil fuels in short supply, makes the step towards SRI seem more logical.

Retirement funds are about the long term, stable investments rather than the short term therefore, it would make more sense to invest in sustainable sectors.

However, oil, gas and other such industries make massive returns therefore, it is unlikely that retirement funds will stop investing in them anytime soon.

But the question is: what will it take for pension funds to change their ways? And will it require a spill bigger than BP for us to look at where our retirement is coming from?