When it comes to the composition of a board – across companies, government institutions and pension schemes etc. – the mark of a good board is one that promotes a diversity of perspectives. It should be guided by a set of values that represent all stakeholders. Too often, the majority are not represented.

Take pension schemes as an example. They have huge amounts of capital to be invested for the long term, on behalf of millions of individual pension scheme members. But the trustee boards of many corporate pension schemes rarely reflect the demographics of the people working in the company offering the pension scheme. The investment strategy is shaped by a small group of people who often think the same way, driven by a similar set of values.

Younger generations – who have a greater stake in the longer-term future of the planet – want their views on sustainability and climate change taken seriously. More people are asking questions about the impact of their investments but the leap from the status quo – where decision making is driven solely by traditional risk & return data – to a more holistic analysis of risk, return and impact, is yet to happen. Mindset will play a big part in making this leap, hence the importance of diverse perspectives. 

I have shared this anecdote before, but I think it is important to keep bringing it up until we see real change. At a roundtable last year, I raised the point that it is important pension schemes develop a set of scheme values that align with the values of their membership, to guide the investment strategy and fund offering. There was staunch disagreement from a couple of attendees. The common thread was a clinging to the past and an under appreciation of the capacity of members to make decisions for themselves.

One particular viewpoint expressed highlights the type of mindset that provides the biggest stumbling block to member values being reflected in the investment policy of a pension scheme: ‘We were all young once and we had ideals, but once we start making some money and are invested in the system our views change dramatically’.

First, a pensions manager or trustee should not impose their own values or entrenched beliefs on members. They need to listen more to members.   

Trustees must objectively represent the pension scheme members and the fact is that younger members (and others) want to see sustainability and societal issues taken seriously. It is not being idealistic to want to see decision making bodies take measures to help secure the future of our ecosystem. There is no hiding behind a backward-looking asset allocation model.

Second, such a mindset depicts a bleak outlook for the future, a conveyor belt of youth institutionalised and assimilated into the system. By the time they have reached any position of authority all ideals of changing the system for the better have been eradicated. The sad part is that there is a certain truth to that. Many an idealist has been lost to the system. Every day, lots of people go to work and their own values are parked at the door during office hours.

Therefore, we need to listen to young people now, before their spirit is broken and they fall into line. Of course, it is not just young people, there are people of all ages who still believe in the need for a better system. For those voices to be represented, we need more diversity on all boards, including trustee boards. We need true diversity, the type that only comes from having people from different backgrounds, ages, and experiences. 

Maybe then we will see the meaningful action that is needed to bring real change.

Values matter!


Vincent McCarthy, CFA

Founder, ESG Ireland