Should pension funds' fiduciary duty be extended to include social, ethical and environmental concerns? A study of beneficiaries' preferences

Many fund managers, lawyers and academics assume that pension funds' legal responsibility to manage assets in the best interests of their beneficiaries (their fiduciary duty) rules out including social, ethical and environmental concerns in investments. A counter-argument is that beneficiaries' best interests can be interpreted more broadly to also encompass such concerns. We seek to contribute to resolving this controversy by measuring preferences for social responsible investment (SRI) among beneficiaries of pension funds. The data from a survey questionnaire answered by 1119 future beneficiaries of the Swedish pension system show that beneficiaries on average prefer their pension funds to go beyond financial concerns and engage in SRI. Analysing the determinants of the preferences, we find support for a model including both financial motives (beliefs about financial risk and returns) and values-based motives (self-transcendent value priorities). Our results give unique insights into the psychological drivers of beneficiaries' preferences that are highly pertinent to present attempts at rethinking the aims of pension investments.