The Origins of ESG in Pensions

Abstract

Abstract As intergenerational stewards of capital, pension funds can have many good reasons to embrace environmental, social, and governance (ESG) issues in their investment practices. Yet the particular structure of pension funds creates both advantages and disadvantages for the integration of ESG. This chapter reviews the historical origins, regulatory mandates, and fund structures of pensions, to tease out exactly which of these characteristics enable and which of them impede the inclusion of ESG in pension funds. We use the case of capital market company PSP Investments to lend depth to the application of the strategies that emerge in the pensions industry.