The £800 billion UK pension fund industry should adopt sustainable investment and invest over longer time horizons as part of the fight against global warming, former US president, Al Gore, told a packed audience at the National Association of Pension Fund conference today.

Evidence of global warming, whatever its origins, abounds for all to see, but will company pension schemes be willing to accept possibly lower investment returns over the short term, in the interests of supporting environmentally friendly companies?

Gore sees short termism and the lack of incentives for investment managers to invest over longer time horizons (which he defines as a minimum of three years) as the major obstacles to the widespread embracing of sustainable investment by the investment management industry.

30 years ago, the average holding period of a stock by an institutional fund manager was seven years, whereas today it’s just 11 months. Furthermore, fund managers are under intense pressure to produce quarterly investment returns which meet, or exceed, demanding benchmarks or they risk losing valuable pension fund or insurance company clients.

So what is the solution to this conundrum? Mr Gore argues passionately that whatever the causes of global warming, the problem cannot be ignored and that to do so will cause damage to pension funds in much the same way as the rapid increases in longevity over the last 10 to 20 years has done to pension schemes.

Would you want your pension scheme to adopt sustainable investment and if so, would you lobby your trustees and scheme sponsor to invest in companies which operate in an environmentally friendly way?

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