Pension trustees are failing to prioritise understanding member attitudes around socially responsible investment, despite aiming for more complicated investment products, lawyers have warned.

Research published by Linklaters has found more than 90 per cent of trustees do not have formal processes in place to understand members’ attitudes to responsible or ethical investment.

Linklaters pensions investment practice partner Rosalind Knowles said despite a number of initiatives to encourage trustees to embrace socially responsible investment, “understanding member attitudes in this area is evidently not something that is being prioritised”.

While SRI featured quite low amongst trustees’ investment priorities, more than 90 per cent plan to increase their pension fund allocations to alternative assets over the next five years.

Of these, 56 per cent plan to increase their allocations significantly, by more than five per cent. Furthermore, 72 per cent of trustees are prepared to consider longevity hedging as a result of recent developments in that area.

Linklaters further highlighted trustees are not being put off derivatives products by their increased regulation, with more than 40 per cent of trustees saying they would be prepared to clear OTC derivatives, even if they were not obliged to.

A further 31 per cent said the regulation would encourage them to use alternative hedging arrangements, such as exchange traded derivatives or listed products instead.

“Over the past few years, we have seen an ever greater choice of products and structures on the market which, as this research shows, trustees are clearly embracing. It shows the appetite among trustees to continue to develop their investment strategies, even where this means increasing exposure to these more complicated and more highly regulated areas,” Knowles said.

“What it highlights is the importance for trustees to understand fully the new products, as well as negotiating the right terms, alongside the need to balance investment risks and returns.”

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