By Keelia Fitzpatrick, Project Officer, ShareAction

11 August 2015

Earlier this year, thousands of members of the Universities Superannuation Scheme (USS) emailed the scheme’s CEO Bill Galvin asking the fund to reassess its investment in companies that manufacture controversial weapons. Many of these weapons not only kill and maim civilians, but are also illegal to manufacture in the UK.

USS recently published their open response to these concerns being raised by members.

The response talks about the legal situation that allegedly prevents USS from divesting from weapons companies. Firstly, they correctly refer to the findings of the Law Commission’s 2014 report on fiduciary duty:

“the Law Commission stated that although the pursuit of a financial return remains the predominant concern of pension scheme trustees, they may also take account of non-financial factors provided two tests are met. These are:

· they have good reason to think that scheme members share the concern, and;

· there is no risk of significant financial detriment to the fund.”

But then the response goes on to say that these findings are consistent with their 2006 legal advice – despite the fact that this advice is not only out of date, but also at odds with several of the Law Commission’s findings. You don’t need to be a legal expert to find USS’s conclusion, based on nearly decade-old legal advice, a little bizarre.

Next, the response states that USS has engaged with companies to address concerns about weapons:

“For example, for defence stocks, the trustee has engaged with companies on the manufacture of land mines and cluster bombs… Examples of the company engagements undertaken by the trustee can be found in the RI Activity Reports and PRI Transparency Reports published under the extensive section dedicated to responsible investment on the USS website.”

When we looked into it, we could not find any examples of USS’s engagement with weapons companies provided in their RI Activity Reports from the last five years. The only reference to controversial weapons made in USS’s PRI Transparency Reports during that time is a policy adopted by one of the fund’s external bond managers. This does not relate to any of their equity holdings. If USS are trying to engage with these companies, it is very hard for members to find evidence of this happening.

On a positive note, the response confirmed USS’s commitment to surveying members for their views on responsible and ethical investment matters. However, this commitment is not reflected in the most recent 2015 members’ survey, which does not include these issues.

There is still a long way to go to get USS to show real leadership by respecting its members’ views. We need more and more members from across the country to join the campaign to get USS to step up. If you’re a member of USS, spread the word to your colleagues by sharing this blog!

Thanks! To find out more about our USS campaign, contact Keelia.

Click here to email USS CEO Bill Galvin to tell USS to stop investing in controversial weapons.