The Government must press pension funds to become responsible investors, says the Trades Union Congress (TUC).

MPs and leading figures from the pensions and investment industry have joined the TUC in urging the Government, institutional investors and fund managers to back a series of proposals on responsible investment, with the aim of addressing the practices that contributed to the current financial turmoil.

A statement released on behalf of all parties says that 'recent events have shown how the failure to hold corporate leaders to account for their decisions about risk can have a catastrophic effect on the financial system, the economy, the corporations themselves and ultimately the well-being of member f pension schemes.'

Treasury Select Committee Chair John McFall MP, Work and Pensions Select Committee Chair Terry Rooney MP, founder of Hermes Stewardship Services David Pitt-Wilson and TUC general secretary Brendan Barber have all signed the proposal.

Pension funds are encouraged to insert a 'do no harm' clause into their statement of investment principles, requiring fund managers and advisers to satisfy pension fund trustees that their decisions in terms of investment are not harming the financial system.

The statement also calls on institutional investors to pledge to the United Nations-backed Principles for Responsible Investment (PRI).

"In recent years some investors have taken their eye off the ball, leaving company executives to run riot with irresponsible business decisions and obscene bonus packages," commented Barber. "At the same time, we have seen the damage done to the financial system by the unchecked use of complicated products and practices like derivatives and short-selling."

Barber said these decisions have contributed to the current financial "mess" and that it is vital that checks are put into place to prevent a repeat of this "irresponsible behaviour".

- Pensions Age January 2009

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