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Understanding Pension Fund Corporate Engagement in a Global Arena
Prof. Gordon L. Clark and Tessa Hebb,
School of Geography and the Environment,
University of Oxford
February 27, 2003
We wish to thank Katherine McFate and the Rockefeller Foundation for their assistance
and sponsorship of this paper. We also wish to thank Paul Tracey and David Mackenzie
for their views and assistance with this paper.
All remaining errors are the sole
responsibility of the authors. The opinions expressed in this paper are solely those of the
paper's authors.
February 27, 2003
1
ABSTRACT
Corporate engagement in its broadest definition is the use of one’s ownership position to
influence company management’s decision-making.
It brings together four distinct
underlying currents in global pension fund and institutional investing.
undercurrent is growing use of passive index funds.
The first
The second is the corporate
governance movement growing since the 1980s. The third force is the growing impact of
socially responsible investing (SRI) by institutional investors with a focus on the social,
ethical and environmental standards of firm-level behavior. The fourth driver is the
emerging role of new global standards dictating firm behavior. It is hoped that this
strategy provides a long-term view of value both for firm-level managers and pension
fund investors, one that promotes higher labor and environmental standards within firms.
It is also hoped that such firm-level practices will add share value to investment, thus
providing long-term benefits to future pension beneficiaries.
Key words: pension fund corporate engagement, corporate governance, socially
responsible investment, global standards
February 27, 2003
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Introduction
The influence of today’s massive pension funds is being felt in every capital market in
the world. The result is not the pension fund ‘socialism’ envisioned by Peter Drucker,
but rather a...