In June the United Nations [UN] launched a public consultation on Principles for Responsible Investment which will continue until 4 September 2015. Its purpose is to pull together existing resources and reach consensus on a list of environmental, social and governance due diligence that the private equity industry could subscribe to.

To date there are almost 900 signatories who between them manage or own about US$30 trillion. However, there is a big difference between signing up to a general set of principles stating your own investments will not infringe human rights or worsen climate change and actually doing something about it.

Mercer recently surveyed investment managers and found that while many talk about SRI, few actually do it. The most common reason why is while the asset owners [investors] like to see SRI on the label of their investments, they are not interested in doing anything that involves a lesser return or that raises costs.

We don’t know if SRI reduces returns or increases cost simply because it is unclear what it entails and there is limited academic evidence providing definite answers.

Many investors confuse SRI with ethical investing. Ethical investors look at an investment universe and impose a negative screen to eliminate investments in arms manufacturers and tobacco companies, depending upon their individual values. This action inevitably leads to lower returns in the long term because there is no reason why such companies should not continue to be profitable.

Recently, a movement has arisen that thinks in terms of sustainability rather than ethics. The movement is concerned with “value, not values”. It calls on governments, corporations and asset owners to recognise the need to work together to build a more stable society in a world where natural resources are under pressure as the population increases. This needn’t mean lower investment returns, rather, it should mean better returns over the long term.

Pension funds should have a strong interest not just in short term financial returns but also in ensuring that the world in which their members will retire will be fit to live in.