The Federation of Small Businesses (FSB) has called on pension funds to hold late paying companies they invest in to account.
The business group called for pension funds to ‘put social responsibility first’ and hold late paying companies to account. It urged funds to seize the opportunities of social factors associated with Environmental, Social and Governance (ESG) investing.
The National Employment Savings Trust (NEST) has been urged to be ‘particularly mindful’ of the ‘S’ in ESG when investing in large companies, the FSB said. It stated that many small and medium-sized enterprises (SMEs) and employees rely upon the NEST, so it must make ‘conscientious investment choices’.
Martin McTague, National Chair of the FSB, said: ‘Simply put, the S in ESG should mean more than adhering to social standards – it should equate to a proactive role in fostering sustainable economic development.
‘When pension funds invest in companies that pay their small suppliers late and fail to take any action on this, they support a detrimental practice that can disrupt the cashflow and financial stability of smaller businesses in local communities right across the UK.
‘By taking a more holistic view of a company seeking an investment’s performance, this will put pressure on the management of companies with a poor late payment track record.’