The United Nations Joint Staff Pension Fund
Issues relating to sustainable development and the global compact
Bernard Cochemé, UN
[Continuation from previous issue].
The Fund and the social and environmental
components of its internal management
Pursuit of the goals of sustainable development and compliance with the principles of the Global Compact lead to re-examining the operating processes and reviewing them in detail with reference to the aforesaid goals and principles.
Two of the nine principles of the Global Compact relate to human rights; they involve, on the one hand, a commitment to uphold and respect human rights in the Organizations own sphere of activity and, on the other hand, to ensure that the Organization is not involved or complicit in human rights abuses. In a tertiary type of activity, such as that of the Pension Fund, these general principles can easily be applied, for instance, in human security in the workplace and measures of protection against accidents in the work- place. Another possible area of application is enquiring into the working conditions of the employees of subcontracting firms providing services under contract to the Organization.
In the area of labour rights, the Global Compact contains four basic principles concerning freedom of expression and collective bargaining rights, support for the elimination of forced and compulsory labour, support for the abolition of child labour and the elimination of all forms of job discrimination. These principles are, of course, already incorporated into the basic goals of human resources policy, but in the area of access to employment, only constant vigilance can ensure that equal opportunityfor example between the sexesis not mere window- dressing, but a reality.
In the area of the environment, the three principles included in the Global Compact concern support for the precautionary principle, a commitment to promote greater environmental responsibility, and the dissemination of environmentally friendly technologies. The internalization of these principles opens up broad areas of work, involving buying chains as well as the evolution from an unthinking consumer culture to a restrained consumer culture concerned with economy and moderation, whether with regard to electric power, water or paper. The range of possible actions is broad, and it is facilitated by the possibility of choosing recyclable materials (paper, computer and telephone equipment), the existence of waste-sorting systems and the wealth of information available on these subjects. Progress in this area is within reach; it requires a modicum of training and a determined approach, to which the Pension Fund can commit itself wholeheartedly for the greater good of the environment and better control of some of its operating costs.
In its approach, the Fund can benefit from the example of similar organizations; from this standpoint, the collection of information on best practices can speed up the process and help to integrate the Fund into a network of organizations with innovative practices.
The Fund and responsible investing
A responsible approach to investing is not new to the Fund, which has, for example, in the course of its history chosen, in accordance with the guidelines formulated by the General Assembly, to stay away from the financial markets of countries practising apartheid.
In addition, the principles established by ILO and the Rio Conference have naturally drawn the attention of investors, who see an opportunity to incorporate them into risk analyses. While investment decisions are traditionally based on technical analyses performed by financial analysts whose models emphasize the prospects of earnings on shares, the consideration of social and environmental factors appears to be both a useful and a necessary complement. It makes it possible to deepen and expand the risk analyses that are an essential component of future performance. Indeed, no one can ignore potential legal risks (lawsuits, regulatory penalties), financial risks (excess costs) or strike risks, or risks to ones image or reputation, which may have an adverse impact on share prices, in situations where a firms activities cause pollution, environmental degradation or social conflicts with its personnel.
Information on social data and environ- mental factors is now widely available from companies themselves, more and more of which are publishing annual reports on these two aspects of their management. This type of information is also offered by specialized research and ratings organizations. Furthermore, many countries have enacted laws aimed at compelling public companies to publish social and environmental data annually. The quality, of course, is not always entirely satisfactory, owing to the obfuscation with which these reports continue to be hedged, or because of the imprecision of the indicators selected, but the trend is under way and remarkable progress has already been made.
In other words, as far as socially responsible investing is concerned, the novelty resides less in the fact that financial managers consider it important to integrate social and environmental factors into their investment decisions, but rather in the more systematic nature of this integration within the investment process.
For the Pension Fund, the tool which appears to be the best suited to defining and highlighting approaches in this area is the Investment Charter, which is updated periodically.
Overall, the best way for the Pension Fund to strengthen its approach and its commitment to the goals of sustainable development and the principles of the Global Compact is to work harder to integrate them into its operating processes in the framework of an action plan for improvement and change over time.
The author is Chief Executive Officer of the UNJSPF