In Summary
  • In Kenya, there is little or no responsible investment, translating to poor appreciation of ESG within the pension funds’ decision makers.

  • Last year, Kenya’s guaranteed funds and segregated funds on average delivered approximately 10 per cent and 18.7 per cent, respectively.

  • Institutional investors have a duty to act in the best long-term interest of beneficiaries.

As the retirement sector regulator works on guidelines to enhance accountability and transparency by pension schemes to protect members’ contributions, it will be critical for trustees to establish an investment strategy that meets the set objectives.

Incorporating environmental, social and governance (ESG) factors into investment decisions, therefore, is key. These include corruption, politics, climate change, working conditions, health and safety.

The meaning of responsible investment and the understanding of how it is best practiced is varied, fast evolving and dynamic. In Kenya, there is little or no responsible investment, translating to poor appreciation of ESG within the pension funds’ decision makers.

The challenge lies in how to expand the market through supportive legal frameworks, availability of responsible investment products or securities to allow trustees to deliberately increase short- and long-term investment performance.

SEGREGATED FUNDS

Last year, Kenya’s guaranteed funds and segregated funds on average delivered approximately 10 per cent and 18.7 per cent, respectively.

Despite the strong economic growth prospects for 2018, it is important to factor in variables such as efficiency of the fund manager, risk profile, macroeconomic environment, asset allocation and investment policy or framework. Trustees must not only select investments that produce returns at an appropriate level but equally apply measures that take into account the nature and term of the underlying liabilities.

Adaptation and implementation of responsible investment strategies is the best route to attaining this. Responsible investment aims at incorporating ESG into decisions to better manage risk and generate long-term sustainable returns.

While the aspect of responsible investment is relatively new to Kenya, it is important for trustees, investors or policy makers to understand that incorporating environmental risk factor is part of investors’ fiduciary duty to stakeholders.

PENSION FUNDS

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