Socially Responsible Pension Fund Options?

April 9, 2008 1:29 PM

My union offers its members a pension plan that allows its participants to allocate their investments in several types of funds (large cap, small cap, money market, etc). How can I convince my association's pension plan fund manager that they can offer a socially responsible fund as an additional option without violating their fiduciary responsibility?
posted by ericbop to work & money (8 comments total)

More information needed. Why would the manager automatically assume that it is violating their responsibility? Also, just for me, personally...what socially responsible fund are you referring to?
posted by hal_c_on at 1:35 PM on April 9, 2008

Either because the fund manager is a conservative a-hole, or because he truly believes that these funds aren't up to the standards of other mutual funds (which is entirely false, but I can't get him to see that, hence option A). I guess what I'm looking for are some real-world examples that I can point to of union pension funds that have socially responsible options. Alternately, any fancy official investor publications with articles to this effect that I could cite might be helpful, too.

An example of a an SRI fund that Fidelity (our pension provider) offers is Spectra Green Fund (SPEGX).
posted by ericbop at 1:40 PM on April 9, 2008

I found some potentially helpful resources here. (Especially in the "Industry Related Reports" section, like "Defined Contribution Plans and Socially Responsible Investing in the United States (2007)" and "Resource Guide for Plan Sponsors: Adding a Socially Responsible Investment Option to Your DC Plan (2007)".
posted by Perplexity at 1:46 PM on April 9, 2008

Can you purchase ETF's through your pension plan? There are quite a few alternative-energy ETFs (GEX, PBW for starters) that have alot of potential and are probably good buying opportunities.
posted by Avenger at 2:04 PM on April 9, 2008

ericbop is right that many have doubts as the soundness of such funds. The duty of a pension manager is to increase shareholder value. The idea of a fund that deliberately eschews certain investments for non-financial reasons is a questionable one in the minds of some.

Assuming the manager is skeptical for this reason, you have to show him documented profitability that's competitive with other potential choices. He's not doing his job if he agrees to offer a "responsible" fund that's unprofitable.
posted by pandanom at 2:05 PM on April 9, 2008

or even less profitable, i'd argue
posted by Salvatorparadise at 2:10 PM on April 9, 2008

I can't recommend any specific funds, but you may want to do some research on John Doerr, of KPCB. Mr. Doerr is a strong advocate of socially responsible investing, particularly in education and green technology. He has also been fantastically successful at traditional venture capital investment (funding companies including Netscape, Sun, Google and Amazon).

I don't know that KPCB will offer options relevant for your pension program, but Doerr speaks frequently (several on google video or youtube) and is extremely well respected in the technology and financial industries.

The right investment vehicle may be an ETF as others have suggested, but Doerr might help you make the argument.
posted by b1tr0t at 6:46 PM on April 9, 2008

My best advice would be to write a detailed letter with supporting documentation about the history of the fund you wish to add as an option. Also request a meeting with the Trustees -- though don't expect them to grant the request.

The type of plan your describing is established under 404(c) of ERISA -- the main fiduciary requirement for this type of fund is (1) proper education of plan participants and (2) sufficient diversification of investments. You should inform the trustees that this type of fund will reduce risk by increasing diversification.

It might also help if you can identify other union members who are interested in this type of fund. The Trustees are more likely to respond if there is a high level of interest.
posted by bananafish at 12:21 PM on April 10, 2008