It’s the investment world’s new obsession: Responsible Investing (RI), complete with all the bells and whistles of Environmental, Social, and Governance (ESG) compliance. It’s in vogue, perhaps even necessary, but it’s time to stop treating it like a flawless saint.
To be clear right from the start, return on investment (ROI) needs to be balanced with responsible investing. We acknowledge that applying only short-term thinking is dangerous; if a secure investment ignores material environmental or social risks today, those returns may well no longer be performing in the long term, adding greater risk to the pensioner or retiree.
However, here is the worrying reality: The RI movement, as implemented today, often resembles a global mission to redress every past and present ill—social inequality, climate sins, and corporate malfeasance—while taking its eye off the singular, fiduciary goal: to bring in a profitable return for the pensioner or retiree. That is the main goal. Full stop.
The True Cost: Fees, Fads, and Financial Performance
Before we even discuss saving the world, let’s talk about the primary drain on your retirement capital: the Fund Managers themselves.
These managers are already stripping away money from investments through what can only be described as iniquitous management fees. We all know that if we break those fees down, they are raking in millions from pensioners annually, and billions when summed up across the industry. Now, they want to layer on a new complexity—the RI/ESG framework—which requires hiring a new army of sustainability analysts and compliance specialists.
Who pays for this new bureaucracy? You do.
It is naive—or perhaps willfully misleading—of these analysts, sustainability managers, and RI proponents to try to redress all the sins of the past while not focusing on the financial performance we all survive on.
It’s not to say that those issues are unimportant, but should your life savings be used as a vehicle to right the wrongs of the world?
This is absolute nonsense.
The Scapegoat Fallacy: Why Must Pensioners Pay for Polluters?
The most egregious part of this ideological drift is the implication that your retirement fund should become the primary payer for all of society’s failures.
Take a hard look at the sources of pollution and social harm:
- Governments that fail to regulate and enforce environmental standards.
- Municipalities that can’t manage infrastructure or prevent widespread littering.
- Private Citizens who throw their rubbish everywhere, burn stuff up, or commit acts of arson that pollute the air.
- Coal-fired power stations that supply the very energy demanded by every citizen and industry.
Surveys and benchmarks—which rank managers poorly for not excluding these sectors—are often totally meaningless because they effectively ask: Must we, the retired and retiring, pay for all of that?
The focus on excluding profitable companies to “punish” them for societal flaws only limits the investment universe and, potentially, the returns needed for your golden years. It pushes the financial burden of systemic failures onto the backs of individuals who had no hand in setting government policy or controlling municipal waste.
The Nuance: Reclaiming the Fiduciary Focus
We accept that solvency—the long-term financial health of the pension fund—is tied to the long-term health of the planet. We must manage systemic risk.
However, the question must always be framed correctly:
Is this Responsible Investment action designed to protect or enhance the returns over the life of the pension, or is it focusing purely on external societal goals?
If a fund manager wants to engage with a company, the objective must be to drive changes that mitigate quantifiable financial risk (e.g., lower future carbon taxes, prevent litigation, improve governance), thereby enhancing the investment’s value. It should not be engagement purely for the sake of public relations or moral signaling.
It’s telling that when we look at leading global responsible investment rankings, the firms achieving the highest A-grade leadership scores are overwhelmingly European, with no major South African manager achieving that top-tier distinction. The local industry is trailing on global benchmarks, yet aggressively adopting the costs and complexity of the movement.
The moment an ESG mandate forces a lower-return investment in favor of a higher-return one, it is failing the pensioner. We need investment strategies rooted in prudent long-term financial survival, not just sweeping social penance.
Further Reading
For reference, one of the more credible global indices ranking asset managers on responsible investment standards can be found here:
ShareAction Point of No Returns Report
