Ethical Investing and Political Meddling
There has been considerable backlash on a proposed government policy change, announced in November 2015. The new proposed council investment rule is intended to prevent local councils from making investment choices based on ethical concerns. Many campaigners and charities, including Councillors and MPs, have already expressed serious concern that this is tantamount to a “direct attack on local democracy.” Ethical investing might seem like a good idea to many, but the UK government believes there should be limits.
Many councils are sensitive to local opinions on a variety of ethical issues, ranging from the arms trade to lesser controversial issues such as tobacco sales. Indeed, many councils followed their ethical concerns in the 1980s and divested from South Africa, expressing the strong prevalent opinions of anti-apartheid at that time. Ethical investing was very high on the public radar with South Africa because of opposition to apartheid, as it is now for many on the issue of Israeli and Palestine.
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Specifically targeted by the government is trade and pension fund portfolios, with proposed changes to the Local Government Pension Scheme Regulations 2009. Ministers have defended this stance by claiming that local councils must stop operating “municipal foreign and defense policies” through “politically motivated boycott and divestment campaigns… against UK defense companies and against Israel.” Israel’s stance on the global stage has long been hotly debated within political, geopolitical, legal, and humanitarian circles, but the British Government has now planned to seemingly take steps to reign in local government to subordinate them to central government’s foreign policies. Is this move to increase centralization of political power an assault on local democracy?
The Local Government Pension Scheme has about 4.6 million members in the U.K. representing stakeholders in local decision making on pension investments. This democratic process affords a voice to local concerns and opinions, and encourages community cohesion and public debate. The charity War on Want has opined that there is government duplicity with its dealings on this issue, arguing that claims of these new regulations will devolve more power to local councils is just “nonsense.”
“Under the proposal, central government will have a veto over decisions made locally. This is unfair and anti-democratic and simply highlights the dishonesty at the heart of the government’s plan.”
To be sure, there are valid arguments coming from both sides of this debate, but this very important issue of ethical investing for local councils is not just simply about the right of councils to represent the views of local stakeholders, it may also be said that it is about the boundaries of political and economic power. Many have charged that political power is deeply entwined with finical and corporate power, so it seems that the government has an uphill struggle to justify why they believe councils should be told where they can or cannot invest local pension money.