Decision Making for Social Investing

Document Type

Book Chapter

Publication Date



Dan M. McGill




Pension Research Council of the Wharton School, University of Pennsylvania




Pension funds are as much a part of our social reality as banks and insurance companies. These funds have been growing at a predictable, constant rate and are expected to reach the $3 trillion mark in 15 years. Their assets are highly concentrated and, thus, represent enormous power. Both employees and employers are increasingly affected by pension funds. The employees are concerned with retirement support, and employers offering defined benefit plans are concerned with the substantial pension funding obligations that affect the employers' financial profile. It is not surprising, therefore, that pension funds have attracted increasing attention and that the question of who will control them and how their assets will be used is quickly becoming an important and widely discussed issue.

In recent years, there has been increasing debate about investing pension fund assets not only to meet financial goals, but also to achieve other social purposes. In a few cases involving primarily public funds, investment decisions have been made that reflect those other purposes, and pressure to continue this trend is expected to increase.

The issue of pension fund investing to effect social purposes raises several interesting and important questions. These include not only preliminary questions, such as what social investment is and why it is considered attractive to some, but also legal, ethical, political, and economic questions, as well as more practical questions of implementation. This last question has not been discussed much in the literature on social investing. The author raises some of the critical questions that must be considered regarding the issue of implementation.

This paper was prepared as a preliminary outline of many of the major issues concerning the social investment of pension funds. It also offers tentative .conclusions of the author on the subjects raised, to inform, to contribute to the debate, and to assist those who face these issues and think about them. The paper is presented as the foundation for further work which will explore these questions more thoroughly.

Finally, the author would like to disclose her bias to the reader, at the outset. The author believes that pension funds should be permitted to invest their assets for purposes other than pure profit maximizing, but that such investing should be carefully monitored and strictly limited to avoid the serious potential dangers and injuries that may result.

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