SRI report finds Asian pension provision lacking
The report covers social security for the elderly in Asia, examining the role of socially responsible investment (SRI) in redressing what it describes as a "dire issue". The report looks at pension schemes in Japan, China, South Korea, Taiwan, Hong Kong SAR, The Philippines, Malaysia, Thailand, Singapore and Indonesia.
Key findings of the report include the following.
Asia's demographic time bomb is ticking. While Asia accounted for 28% of the world's population aged 60 and older in 1985, that proportion will more than double to 58% in 2050. The rate of aging in the region will be the fastest in the world, and in absolute numbers, the ôglobal challenges facing social security systemsö will be largely Asian it argues.
Pension provision in Asia, where it exists, is often inadequate in terms of coverage and the size of the savings pool relative to existing and future liabilities. In addition, Asia's pension capability tends to be less developed than other countries at a similar level of economic development. Apart from Japan, no country in Asia has universal coverage.
Despite this lack of development, pensions are the fastest growing capital pool in the region and will have a major influence on the shape of economic development in the coming century.
Adequately funded pension schemes are a core feature of social security systems designed to eliminate poverty. Some 278 million people in Asia still live in poverty on less than US$1 per day.
The report urges responsible investors, private and institutional, to consider the adequacy of pensions provision as part of their assessment of a company's social scorecard. Adequately funded pensions schemes should be a key requirement among Asian corporations, as it should be for all companies that are included in SRI investment portfolios.
The report also examines how SRI fits with the long-term investment objectives of pension funds and outlines how leading pension funds are adopting SRI policies. It urges Asian pension schemes (public and private) to consider SRI policies and fund options to drive Asia's fastest growing capital pool towards the creation of environmentally sustainable and prosperous private enterprise. At the very least, where pension plan members have a choice they should have the chance to select an SRI option for their savings.
SRI, sustainable and responsible investment or socially responsible investment is an investment strategy that allows investors to take into account wider concerns than purely financial, such as environmental protection, social justice, poverty alleviation and peace. Financial performance is a critical component of the investment decision just like any other investment strategy, but additional needs are also considered.
ASrIA, The Association for Sustainable and Responsible Investment in Asia, is a non-profit members association dedicated to promoting sustainable investment practice in Asia.