Members of Notts Pension Fund have started to ask questions about its investments in fossil fuel companies. At the Fund's Annual Meeting in October 2015, members raised a number of issues about both the ethics and financial risks associated with fossil fuel investments:
- Many financial experts, including Bank of England Governor Mark Carney, have warned that, because most proven fossil resources will have to be left in the ground to avoid dangerous climate change, this could mean writing down the value of companies with these reserves.
- Investing in fossil fuel companies would appear to be contrary not just to national commitments to reduce greenhouse gas emissions but also to environmental objectives in the County Council's own Strategic Plan.
- There have been significant losses on investments in coal companies in particular: between 31 March and 30 September 2015, Rio Tinto shares lost 20% of value, BHP Billiton 32%, Anglo American 39%, Glencore 68%. As well as over £70m in these coal companies at 31 March, Notts Pension Fund also had over £80m in HSBC and Barclays banks which have funded large scale coal extraction around the world destroying people's environments.
- Local authority pension funds, including Notts, have a policy of 'engagement' using their collective power of share ownership 'to push for an orderly carbon transition by requiring companies to identify and tackle carbon risks in their business models'. While that may be useful with many companies, what use is it with companies which can't or won't move their core business models away from the extraction of fossil fuels?
- What are their plans to invest in local clean energy schemes such as solar panels on school roofs, zero carbon homes, etc?
- An index of shares without fossil fuel companies has outperformed all-shares over the last five years. So there would be no financial loss from dropping fossil investments.
Responses from the Council's Fund Manager included:
- Fund management needs to balance risk in the short, medium and long term; because the certainty of timing of fossil fuel risks is far from clear no action has been taken.
- The Fund has been concerned about climate change since 2002 but supports engagement not divestment. For example, at BP and Shell AGMs shareholder votes have required: reporting on emissions management, future energy scenarios. low carbon research, assessment of stranded assets, and adopting a public policy on climate change.
- The Fund is already encouraging coal companies to withdraw from the worst examples of environmental destruction.
- A recent allocation has been made to infrastructure investment, which might include renewable energy schemes, and this is likely to increase. [But this is a small proportion of the overall fund, and no details are being made public.]
- The Fund will be reviewing how it benchmarks its performance in equities investment (though this is mainly because global equities indices are biased towards US market performance which may be out of line with UK performance), and may consider the impact of fossil fuel company performance.
Notts Pension Fund has around £4bn invested on behalf of 114,000 members - employees of local authorities around the county as well as educational bodies and many voluntary organisations. Over £250m is directly invested in shares in the biggest oil, gas and coal companies.
Nottingham Friends of the Earth wil be supporting a campaign to persuade Notts Pension Fund to get its money out of fossil fuel companies. For further details see our campaign page on divestment. For campaigns around the country see Fossil Free UK and Friends of the Earth's national fossil fuel divestment campaign.