Pensions for Purpose and its partners hope the updated principles will show UK pension scheme trustees new routes to intentionally delivering on responsible investment, as well as returns.
Impact investing principles for the UK pensions industry, originally drawn up in 2020 by the UK’s Pensions for Purpose and Impact Investing Institute, have been revised and relaunched with added input and endorsement from the Global Impact Investing Network (GIIN).
Pensions for Purpose said the revisions reflected five years of market experience and legal changes and took account of rising expectations from pension savers that investments should be impactful, and of evolving regulatory demands.
The updated Impact Investing Principles for Pensions encourage pension schemes to set impact goals that represent the needs and values of their beneficiaries, such as housing, climate change mitigation or community wellbeing. The new framework also aims to establish stronger accountability by linking impact priorities with incentives and clearer reporting, pushing schemes towards a focus on outcomes, rather than just intentions.
The hope is that the changes will help make impact relevant for UK pension schemes regardless of size, structure or starting point. Pensions for Purpose called on all pension schemes, whether defined benefit, defined contribution, trust- or contract-based, to adopt the principles and invited those ready to embed them into governance and investment processes to sign a statement of commitment.
Charlotte O’Leary, CEO of Pensions for Purpose, said the principles were a public good that sought to show pension scheme trustees how to intentionally deliver returns and responsibility, not choose between the two.
She told Impact Investor that some of the revisions reflect changing legal views of fiduciary duty, which mean that beneficiaries in the UK can now reasonably expect their pension schemes to consider how investments will impact the social and environmental conditions prevailing in future at the point when they retire.
Focusing on measurable actions, such as investing in affordable homes, clean water and energy, allow investors to move beyond meeting member expectations to protecting their savings from the systemic risks already negatively impacting portfolios, according to O’Leary.
“We also want pension fund trustees to be looking at an impact thesis alongside their investment thesis. So, we have made it far more explicit that having a theory of change around the social and environmental impact that they want to have should be a starting point,” she said.
Integration across mandates
The 2025 principles call for pension schemes to identify their impact priorities and tie them to the current and future needs of scheme members, to explore ways to integrate impact considerations across mandates, and to look at ways to incentivise partners to help achieve impact priorities through their investment strategies and stewardship activities.
The impact of investments should be measured and managed against scale, change over time, and the impact of capital invested, with the results reviewed to test the validity of a pension scheme’s impact thesis, Pensions for Purpose said.
The principles are part of Pensions for Purpose’s work on impact integration. The organisation is planning to publish research on integrating impact, based on collaboration with asset owners, in July. It is also working with Impact Frontiers to develop impact performance reporting norms.
O’Leary said the addition of the GIIN as a partner in developing the principles has added a valuable global perspective, especially in light of the organisation’s role as the overseer of the global Operating Principles for Impact Management (OPIM).
Pension scheme adopters of the principles include Aon MasterTrust, the Environment Agency Pension Fund, Smart Pension Master Trust, South Yorkshire Pensions Authority, Surrey Pension Fund and Wiltshire Pension Fund, among others. Investment consultant and fiduciary managers adopting the principles include Aon, Cardano, Redington, Schroders Solutions and XPS Investment. Supporters promoting the principles include GSG, the World Benchmarking Alliance and others.
In February, Impact Investor spoke to Charlotte O’Leary about wider trends affecting impact investing and her belief that there is a need for great innovation in the impact sector, in an interview available here.
