By George Hammond, USS Organiser, ShareAction

24 September 2015

In 1997, People & Planet – a network of student campaign groups –­ began connecting members of the Universities Superannuation Scheme (USS). The ‘Ethics for USS’ campaign that developed from that network set out to get the scheme listening to its members, achieving notable success within two years when their pension fund became the first in the country to formally adopt a socially responsible and sustainable investment policy.

Back then Guy Hughes, a key player in the campaign, noted that “The Ethics for USS campaign provides encouragement and an effective model for pension scheme members who no longer want to profit at the expense of others.” Hughes checked his optimism though, acknowledging that “many questions remain unanswered. How will USS pressurise companies? How will it determine the standards of corporate behaviour it will work towards? What happens if a company does not respond positively?”

On both counts Hughes was prescient: Ethics for USS was the genesis of ShareAction, while the responsible investment policy adopted by USS became a blueprint for other pension funds to follow. Amidst those victories, though, there remained an opacity about what exactly ‘responsible investment’ meant in practice to USS.

Today, eighteen years later, much has changed – responsible investment has transitioned to the mainstream, with dedicated funds and growing institutional backing – but many of those ‘unanswered questions’ persist. How is USS engaging with companies? How do they gauge the views of their members? How do they understand their legal duties as trustees?

These lingering questions are why we are still – almost two decades later – campaigning to get USS to listen to its members. It’s been a long battle, but we are making progress. In December last year the Listen to USS campaign gathered over 3000 signatures for a petition asking USS to incorporate the views of its members into investment decisions. There followed a meeting between representatives of the campaign and USS, and commitments from USS to survey members on their ethical concerns.

There remains a huge amount to do. Still, USS refuses to engage in meaningful, consistent conversation with its members; still they invest in companies producing controversial weapons; still they pour members’ money into risk-laden fossil fuel companies; and still they rely on a narrow interpretation of the law to justify their investments.

That’s why we are launching a new phase of the campaign USS: Step Up, which has three clear aims. We want USS to respect the views of its members by properly surveying them and inviting member representatives to the annual Institutions’ Meeting with the Trustee Board. Articulating the concerns of surveyed members, we are also asking that USS take steps to divest from landmines and cluster munitions – which are illegal to manufacture in the UK. Finally, we ask that USS takes climate risk seriously and aligns its portfolio with a ‘two degree world’ scenario, beginning with divestment from thermal coal.

Last year the Law Commission published a report stating that pension funds may take account of non-financial factors in their investment decisions, so long as there is good reason to think they are acting on members’ concerns and the decision does not pose the risk of significant financial detriment to the fund. The recommendations laid out by the Law Commission give new impetus to our campaign, providing a legal basis for members’ legal views to be acknowledged.

The moral and legal arguments above are of vital importance. But there is also a financial case to be made. Coal prices have more than halved since 2011; the divestment lobby is cranking up the volume; the responses to environmental scandals are becoming more vociferous; and landmark climate talks in Paris in December could redefine the boundaries of carbon use. The combination of these trends serves to increase USS’ risk exposure: both in terms of their reputation and their balance sheet.

Hughes concluded by calling the campaign a “progressive movement”, at which “it is only right that the academic community should be at the forefront”. His sentiment is just as true today and, with almost £50bn worth of individual savers’ pensions at stake, the imperatives for acting are more powerful than ever.

Join us at the Grantham Institute at Imperial Collect London on November 18th to discuss USS investments in the context of climate change. Click here to register your interest.