Dear Member of the General Assembly,
The UN pension fund is now worth $90 billion, a huge responsibility to manage and an important liability for UN Member States in case things go wrong.
Overseeing the fund requires transparency, accountability and a strong legal framework. The General Assembly members and staff have been clamouring for this for several years. But a new so-called ethics policy and other proposals from the UN pension board that are under consideration by the General Assembly appear to be aimed at eroding those critical principles.
Designed in part to quash dissenting voices, the new ethics policy threatens to expel board members who raise concerns with General Assembly members or even speak with them. This is despite the board being a subsidiary body of the GA. The policies also block staff involved in pension administration from running for election to the board, thus depriving fund governance of vital institutional knowledge.
Staff unions report that participant representatives (those who are elected by staff) have been instructed by the Secretary-General not even to report on their activities.
These are the same UN participants who have worked hard in the past to highlight concerns about how the fund is managed, as all board members should, and who have seen their concerns consistently backed up by UN internal audits (the Office of Internal Oversight Services) and in many cases, by the General Assembly itself.
This is why elements of the fund’s management have been working hand-in-hand with certain old-timer pension board members to silence dissent and impose incrementally onerous confidentiality requirements on board members, the proposed ethics policy being the latest example.
And this is not the first time. Just last year, UN participant representatives were hauled on the carpet by Martha Helena Lopez, the Assistant Secretary-General for Human Resources, for communicating their concerns to members of the General Assembly. https://www.passblue.com/2020/12/23/the-un-pension-funds-latest-flareups-and-hazards-to-whistleblowers
The UN Appeals Tribunal (UNAT) has twice had to block the strenuous efforts of this coalition to block individual participant representatives from taking their seats on the board. For this reason, the General Assembly has now been asked to remove the board’s activities from oversight by UNAT, leaving the fund with no legal regulation of its activities, something unknown for a modern, well-managed pension fund.
And during all this time, the fund’s investments underperformed its comparators, not surprising given last year’s investments governance audit (A/75/215, 21 July 2020) that found serious management failures. The more recent human resources audit of the Office of Investment Management (OIM) (2021/038 dated 24 August 2021) raises continued concerns. This only increases worries by staff concerning resolution 75/246, by which the General Assembly authorized the Secretary-General to conduct margin trading on a trial basis for two years but requested more detailed proposals on the use of derivative instruments, engagement in margin trading, and participation in securities lending, as well as compliance measures.
Other issues that could impact over time on fund performance include significant budget growth and apparent non-existent efforts to control costs.
Meanwhile there seems to be little progress on achieving transparency on the fund’s application of environmental, social and governance standards, including in light of recent media reports on the ubiquity of “greenwashing” and the limitations of ESG analysis. https://www.fastcompany.com/90698724/esg-investing-has-a-sustainability-blind-spot-supply-chains?fbclid=IwAR2lTgMeDwAuUwwkCTHj2ddxqVvXrlGtXfq9kyWZjcorDxOthvVq7lNgyMk .
The elephant in the room this year will be the fund’s governance.
Last year’s governance report, requested by the GA, and conducted by an independent consulting company (Mosaic) cited variances (deficiencies) on every significant governance aspect between the UN pension fund and comparable funds. Notably, the report stated that board members were unclear about the meaning of their fiduciary responsibilities.
A concern of the GA in requesting a governance review, relates to adjusting the board’s composition to make it more representative of its members (the UN makes up two-thirds of participants and therefore financial participation and liability but only has one-third of board votes); holding more frequent meetings; and reducing the number of people in the meeting room (last counted at 93).
Based on the GA’s request, the board agreed to restrict physical participation in the board to 33 members (of which only 12 are UN), and 4 members of FAFICS (the Federation of Associations of Former International Civil Servants), on the premise that reducing physical presence in the room allows more focused decision-making. All alternate board members except those of the GA would join virtually.
However, it did not address the GA’s request to rebalance the composition so as to reflect financial participation in the fund.
The removal of alternates has now exacerbated the imbalance as the specialized agencies did not agree that their 18 bonus representatives, who are in addition to their 22 members, would not participate physically but join virtually. This means that at the next board meeting there will be 15 people in the room for the UN versus 40 for the specialized agencies, which brings the UN share to 27 percent. This further exacerbates inequalities and makes it even harder for the fund’s main member organization, the UN, to maintain control of the fund’s activities and liabilities, or bring spending and other issues under control. The fact that the representatives are not voting does not matter as decisions are reached by consensus.
Hopefully the General Assembly will decide on the following this session:
· That the 18 specialized agency non-voting representatives be required to join virtually so as to re-establish some balance in the meeting room.
· That the ethics policy be revised to remove section 8, which prohibits contact with Member States, and to remove section 24 (e) which allows the board to expel its own members.
· That Article 48 on UNAT and Article 6 on who can run for election to the Board not be modified.
· To restrain budget growth.
The $90.3 billion UN pension fund needs to be more transparent and accountable. However, its onerous confidentiality and ethics policy and its move to prohibit staff with pension administration experience from running for election to the board, both aimed at preventing board members raising concerns early on with GA members, added to severe imbalances in board composition, all hold significant risks to effective oversight and accountability. This is something the General Assembly, which would ultimately have to bail out the pension fund, simply cannot afford.
Sincerely,
Loraine Rickard-Martin
UNJSPF beneficiary
Admin: http://unpension.blogspot.com
