What are our pension savings funding?

CigmTBXXEAA25dOThough we may not realize it, all those of us who are savers are stakeholders in the financial system, and should be able to find out where and how our money is being invested. However, it can be complex to map the chain of relationships between us as savers and what our money actually funds.

I was part of the ShareAction Pension Power team that visited the Department of Work & Pensions (DWP). We had a simple message for the officials that met with us: the government should take steps to improve transparency in the pensions industry. Simply put, we want the people that manage our retirement savings (pension providers) to communicate clearly with members like us, and be open about the investments they make our behalf.

A meeting with government officials might seem a little daunting, but we were accompanied by ShareAction staff and armed with some home truths. We were sure our personal stories of engaging with pension providers would drive home the arguments we wanted to make.

A key point was related to democracy. The majority of us save for retirement via our workplace. Employers pick the pension provider that suits them and, unless we opt out and don’t save at all, we’re stuck with that provider, for a long, long time. It seems sensible then, that we should get a say in how our pension scheme operates.

In particular, we should have the ability to hold key decision-makers to account. These people manage and invest trillions of pounds of our savings. With great power comes great responsibility. Or at least it should do which is why we told the officials at the DWP that pension savers need formal opportunities to find out what those decision-makers are up to and if they’re doing a good job.

What do these formal opportunities look like? We pointed out how some pension providers are already stepping up in this area. Some are organising annual members’ meetings to update savers face-to-face. Others appoint people to their boards who are selected by the members themselves. So the saver’s voice gets right to the heart of the action. These are tangible steps towards a democratic pensions system.

To truly work out if the people managing our savings are looking after our long-term interests, we need information as well. That’s why we stressed that the government should also concentrate on promoting transparency. Pension providers own large shares in the biggest companies in the world. But what are they doing with these holdings? Are they meeting with company bosses to encourage good governance that promotes long-term value? Are they using their right to vote on key company decisions, including environmental and social issues that have a material financial impact? They should be. We made it clear in the meeting that savers deserve to know this information about their pension provider’s action.

The DWP officials seemed impressed by our knowledge, and our personal stories had a real impact on their team. They said they wanted to hear more savers’ stories and case studies to paint a clearer picture of how their policies work on the ground.

We also had some time to hear about the government’s priorities for the coming years. Not surprisingly, they are focusing on auto-enrolment and providing value-for-money for savers.  With so many new pension savers entering the system, there’s a huge opportunity to use policy to improve consumer outcomes and choice. Increased transparency will be vital in making the most of this opportunity.

Better pensions policy for savers won’t happen overnight. We have high hopes that the meeting was the start of a sustained relationship with the DWP. But for now, we are glad that we had the opportunity to take the voice of savers to heart of government!


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The post first appeared on the ShareAction blog:

Show us the money (or at least where it goes): talking transparency in pensions with the DWP

How do we value nature?

FullSizeRender“Does nature come with a price tag?” asked the Earthwatch Spring Debate, deliberately provocative for an audience committed to conserving it.  Tom Heap, presenter of the BBC’s immensely popular, Countryfile, attributes the programme’s success to our hankering “after the real and natural”.  We are drawn to nature, we depend on it, thrive in it and yet, as Tony Juniper’s opening remarks reminded us, all indicators of nature’s health are pointing in the wrong direction. After thirty years of environmental campaigning, Juniper argues that putting a monetary value on nature help make the case for conservation with decision-makers. Otherwise, nature is cast as an impediment to economic growth and George Osborne promises ensure “things like Habitats aren’t placing ridiculous costs on British businesses.”

Georgina Mace, Professor of Biodiversity and Ecosystems, Head of the Centre for Biodiversity and Environment Research at University College London, and member of the Natural Capital Committee (though not speaking on their behalf) explained that in the past supply of natural capital was much greater than demand.  Today, negative impacts in one locality can no longer be offset elsewhere.  We cannot expect stocks to recover in the future, and resource constraints are starting to bind.  Scarcity of nature, as with all things, requires choices, which imply priorities, and, Mace argues, make valuation imperative.  It is not a matter of whether to value nature, or the services that it provides us, but, how to value it, in order to justify and generate funds for its restoration, protection and enhancement.

Mace distinguished between price and value.  Prices can be distorted, are subject to fashion (witness the rise of kale), focus on one aspect of value, and depend on the flow, not the stock of something.  Natural capital is our planet’s stock of natural assets including geology, soil, air, water and all living things.  The flow of benefits, or ecosystem services, is a function of the stock’s condition.  Revealing the value of these ecosystem services can tip cost-benefit analyses in nature’s favour. For example, degradation of upland peat bogs through burning, drainage, or removal of peat for fuel damages their ecosystem service provision.  A five-year project by South West Water, and its partners, to restore the peat bogs of Exmoor is demonstrating significant benefits through water and carbon storage, improved water quality and mitigation of downstream flooding.

The final speaker for the motion, Mark Huxham, Director of Academic Strategy at Edinburgh Napier University, the founding director of the charity ACES (The Association for Coastal Ecosystem Services) talked about the Mikoko Pamoja initiative (‘Mangroves Together’ in Kiswahili) in Kenya.  Mangroves provide biologically diverse marine habitats, protection from storms and coastal erosions, vital fish nurseries, and are among the most efficient natural carbon sinks.  The project in Kenya uses the mangroves’ ability to store carbon to deliver payments for ecosystem services (carbon credits) that fund conservation and community projects. Sustainable livelihoods are a key part of the puzzle, with well-managed ecosystem services one way to deliver value to those who so intimately rely on nature.

Miles King, CEO of People Need Nature, opened for the opposition asserting that the value of nature is far greater than the sum of its parts. Mike Hannis, Research Fellow in Environmental Ethics at Bath Spa University, observed natural capital accounting fails to capture the complexity and unpredictability of nature’s system-dynamics. What is more, the cultural value of nature is subjective. As Mace accepted attempts to value the intangible benefits of nature for aesthetic, inspiration and spiritual purposes are “at best compromised, at worst terrible”.

Sian Sullivan, Professor of Environment and Culture at Bath Spa University, echoed her colleagues’ criticism of flawed financial markets framing nature as a liability. Sullivan, described a pattern of capital moving in and striping away the natural assets in Namibia: first whaling, then guano and diamonds. Sullivan spoke of the Yasuni-ITT Initiative, where Ecuador’s government promised not to drill for oil in the national park in exchange for international. While figures were forthcoming, funds were not, and the initiative failed. Market preferences, Sullivan observes, have been to not pay.

Both teams agreed that power and wealth distribution are intrinsically linked to sustainable development and the fate of nature, as the tale of rising farmer suicides, water shortages and corrupt water management in a recent Financial Times article.

My heart empathized with Team King, though my head supported the pragmatism of Team Juniper.  The choice was between how we would like the world to be, and how it is. As Mace said “If we treat nature of infinite value, or of no value, then it gets trashed”. The audience seemed swayed.

Screen Shot 2016-05-14 at 12.46.40While we chuckle at cartoon Sullivan shared from the New Yorker, take a moment to reflect that through our pensions, savings, and ISAs we are the very shareholders lampooned. Global financial systems are dynamic. Some major players such as the Financial Stability Board, the G20’s Green Finance Study Group are studying environmental and social risk and long-term value. Oxford’s Smith School of the Enterprise and the Environment runs programmes so environmental NGOs can advocate for financial systems that deliver better environmental outcomes. As an individual ask your IFA, or pension provider about the environmental and social impact of your savings. If we engage with the system we can challenge the out of date assumption that short-term shareholder maximization is in our best interests.

A video of the full debate is available here.

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