Fossil fuel divestment was once viewed as a moral undertaking; now it is as much about reducing financial risk. In October last year, Cambridge University finally announced its aim to have no meaningful exposure to fossil fuels in its investment funds by 2030. A University report summarised the long-running debate and included this recollection from visiting American environmentalist, Bill McKibben that …. Exxon built rigs to account for climate change-related sea rise while funding climate change denialism research (Oreskes and Conway 2010). He commented “intellectual dishonesty on that scale would get you kicked out of Cambridge in a minute”. But alongside the moral arguments, were those of sound finance: ‘Overall, there is little evidence to suggest that a global portfolio invested to exclude fossil fuels would underperform one that included them and such a portfolio might avoid the volatility that is likely to affect the fossil fuel sector in the coming years.’
It has been calculated that were oil companies to extract all oil in their existing developed reserves (oil fields), this alone, when burnt, would use up the remaining available carbon budget before breaching 1.5 degrees Celsius global temperature rise compared to preindustrial levels. Yet oil companies continue with oil exploration. Last year, BP announced a £14billion asset write-down acknowledging a shift towards renewable energy. There is a real risk of remaining invested in assets that will become stranded assets; the ownership of oil reserves that will now have to remain in the ground. In 2015, UK local authority pension funds lost nearly £700million when the market for coal collapsed. Mark Carney, the governor of the Bank of England, issued a blunt warning in 2015 that investors, like pension funds faced “potentially huge” losses as action on climate change could make vast reserves of oil, coal and gas “literally un-burnable”.
This Council has declared a climate and ecological emergency. We now know Investments in fossil fuels are not only harmful to the environment but also put the sustainable future of pensions at risk.
In December last year, the National Climate Change Committee released a paper ‘Local Authorities and the Sixth Carbon Budget’. It lists 9 ‘overarching priorities’ for local authorities and one of these relates to pensions schemes investments. ‘Local authority pension funds should disclose their approach to assessing and managing climate risks and should consider investing in Net Zero aligned schemes within their legal duties.’ This aligns with Clause 124 of the Pension Schemes Bill currently before Parliament where the Act is likely to mandate larger private sector pension schemes to manage climate change as a financial risk and to report publicly on how so.
We note from the Investment Strategy Statement of the Cambridgeshire County Council Pension Fund, ‘The Fund supports the principles of the [Financial Reporting Council] UK Stewardship Code and is working with the Fund’s advisers with the intention to sign up to the Code.’
We further note: this Code requires ‘Signatories systematically integrate stewardship and investment, including material environmental, social and governance issues, and climate change, to fulfil their responsibilities.’
The Pension Fund Committee, in partnership with Investment Sub Committee and Local Pension Board decides pensions investment strategy. Nevertheless, SCDC staff pensions are part of a Defined Benefits scheme, meaning that SCDC has a financial interest in the long-term efficiency of the fund since any future shortfall, including by failure to recognise any risks (or investment opportunities) associated with climate change, would be set against a balance sheet liability. Fiduciary obligations are aligned with the UK´s legal obligation to meet its climate goals. As a UK´s Pension Minister said of the Climate Change Act: “This legislation commits the UK to a path that pension funds must play a massive role in” which means no longer helping fund oil production and exploration and keeping within the remaining carbon budget.
This Council
- Asks the Chief Executive to write to the Pension Fund Committee, Investment Sub Committee and Local Pension Board jointly, to request how they, on behalf of SCDC as an employer, intend to manage the effects of climate change as a financial risk to their investments and how this will be reported.
Decision:
Following the agreement of the mover of the motion to an alternative to add the words “including the issue of divestment,” to the last paragraph of his motion,
Council AGREED the following motion:
Motion – financial risk of climate change on pension fund – Geoff Harvey
Fossil fuel divestment was once viewed as a moral undertaking; now it is as much about reducing financial risk. In October last year, Cambridge University finally announced its aim to have no meaningful exposure to fossil fuels in its investment funds by 2030. A University report summarised the long-running debate and included this recollection from visiting American environmentalist, Bill McKibben that …. Exxon built rigs to account for climate change-related sea rise while funding climate change denialism research (Oreskes and Conway 2010). He commented “intellectual dishonesty on that scale would get you kicked out of Cambridge in a minute”. But alongside the moral arguments, were those of sound finance: ‘Overall, there is little evidence to suggest that a global portfolio invested to exclude fossil fuels would underperform one that included them and such a portfolio might avoid the volatility that is likely to affect the fossil fuel sector in the coming years.’
It has been calculated that were oil companies to extract all oil in their existing developed reserves (oil fields), this alone, when burnt, would use up the remaining available carbon budget before breaching 1.5 degrees Celsius global temperature rise compared to preindustrial levels. Yet oil companies continue with oil exploration. Last year, BP announced a £14billion asset write-down acknowledging a shift towards renewable energy. There is a real risk of remaining invested in assets that will become stranded assets; the ownership of oil reserves that will now have to remain in the ground. In 2015, UK local authority pension funds lost nearly £700milion when the market for coal collapsed. Mark Carney, the governor of the Bank of England, issued a blunt warning in 2015 that investors, like pension funds faced “potentially huge” losses as action on climate change could make vast reserves of oil, coal and gas “literally un-burnable”.
This Council has declared a climate and ecological emergency. We now know Investments in fossil fuels are not only harmful to the environment but also put the sustainable future of pensions at risk.
In December last year, the National Climate Change Committee released a paper ‘Local Authorities and the Sixth Carbon Budget’. It lists 9 ‘overarching priorities’ for local authorities and one of these relates to pensions schemes investments. ‘Local authority pension funds should disclose their approach to assessing and managing climate risks and should consider investing in Net Zero aligned schemes within their legal duties.’ This aligns with Clause 124 of the Pension Schemes Bill currently before Parliament where the Act is likely to mandate larger private sector pension schemes to manage climate change as a financial risk and to report publicly on how so.
We note from the Investment Strategy Statement of the Cambridgeshire County Council Pension Fund, ‘The Fund supports the principles of the [Financial Reporting Council] UK Stewardship Code and is working with the Fund’s advisers with the intention to sign up to the Code.’
We further note: this Code requires ‘Signatories systematically integrate stewardship and investment, including material environmental, social and governance issues, and climate change, to fulfil their responsibilities.’
The Pension Fund Committee, in partnership with Investment Sub Committee and Local Pension Board decides pensions investment strategy. Nevertheless, SCDC staff pensions are part of a Defined Benefits scheme, meaning that SCDC has a financial interest in the long-term efficiency of the fund since any future shortfall, including by failure to recognise any risks (or investment opportunities) associated with climate change, would be set against a balance sheet liability. Fiduciary obligations are aligned with the UK´s legal obligation to meet its climate goals. As a UK´s Pension Minister said of the Climate Change Act: “This legislation commits the UK to a path that pension funds must play a massive role in” which means no longer helping fund oil production and exploration and keeping within the remaining carbon budget.
This Council
- Asks
the Chief Executive to write to the Pension Fund Committee,
Investment Sub
Committee and Local Pension Board jointly, to request how they, on
behalf of SCDC
as an employer, intend to manage the effects of climate change as a
financial risk to
their investments, including the issue of divestment, and how this
will be reported.
Minutes:
Councillor Geoff Harvey moved a motion as follows:
“Fossil fuel divestment was once viewed as a moral undertaking; now it is as much about reducing financial risk. In October last year, Cambridge University finally announced its aim to have no meaningful exposure to fossil fuels in its investment funds by 2030. A University report summarised the long-running debate and included this recollection from visiting American environmentalist, Bill McKibben that …. Exxon built rigs to account for climate change-related sea rise while funding climate change denialism research (Oreskes and Conway 2010). He commented “intellectual dishonesty on that scale would get you kicked out of Cambridge in a minute”. But alongside the moral arguments, were those of sound finance: ‘Overall, there is little evidence to suggest that a global portfolio invested to exclude fossil fuels would underperform one that included them and such a portfolio might avoid the volatility that is likely to affect the fossil fuel sector in the coming years.’
It has been calculated that were oil companies to extract all oil in their existing developed reserves (oil fields), this alone, when burnt, would use up the remaining available carbon budget before breaching 1.5 degrees Celsius global temperature rise compared to preindustrial levels. Yet oil companies continue with oil exploration. Last year, BP announced a £14billion asset write-down acknowledging a shift towards renewable energy. There is a real risk of remaining invested in assets that will become stranded assets; the ownership of oil reserves that will now have to remain in the ground. In 2015, UK local authority pension funds lost nearly £700milion when the market for coal collapsed. Mark Carney, the governor of the Bank of England, issued a blunt warning in 2015 that investors, like pension funds faced “potentially huge” losses as action on climate change could make vast reserves of oil, coal and gas “literally un-burnable”.
This Council has declared a climate and ecological emergency. We now know Investments in fossil fuels are not only harmful to the environment but also put the sustainable future of pensions at risk.
In December last year, the National Climate Change Committee released a paper ‘Local Authorities and the Sixth Carbon Budget’. It lists 9 ‘overarching priorities’ for local authorities and one of these relates to pensions schemes investments. ‘Local authority pension funds should disclose their approach to assessing and managing climate risks and should consider investing in Net Zero aligned schemes within their legal duties.’ This aligns with Clause 124 of the Pension Schemes Bill currently before Parliament where the Act is likely to mandate larger private sector pension schemes to manage climate change as a financial risk and to report publicly on how so.
We note from the Investment Strategy Statement of the Cambridgeshire County Council Pension Fund, ‘The Fund supports the principles of the [Financial Reporting Council] UK Stewardship Code and is working with the Fund’s advisers with the intention to sign up to the Code.’”
Councillor Geoff Harvey said Trinity College and others had announced the intention of divesting from fossil fuel investment recently. There was a debate on the plane of both morality and finance. Research showed oil investment did not confer particular advantage and was in fact a risk. He asked Members to support aligning moral, fiduciary and legal obligations under climate change legislation by voting for this motion.
Councillor John Williams, Lead Cabinet Member for Finance, seconded the motion. He said the UK’s biggest pension fund had begun divesting from fossil fuels, as had a number of others. This was not easy to do, but that should not deter the Council from setting the ball rolling. It was in the financial interest of future local government pensioners that local authorities start divestment and he asked that Members support this first step.
Councillor Dr Richard Williams said a good case for divestment had been made but the motion should have the courage of its convictions and call for divestment of the pension fund.
Councillor Deborah Roberts said she was at a loss as to what the Council intended. There were two sides to this matter, morality was a distraction and it was not as simple as being more green and, as shown in places such as Texas, the world was not ready for oil divestment. Trinity College had been bullied into divestment. The real problem was population level, which had been recognised by China.
The Leader, Councillor Bridget Smith, objected to what appeared to be a derogatory reference to Chinese people.
The Chair accepted this objection and said Councillor Deborah Roberts had run out of time to speak.
Councillor Deborah Roberts clarified she had not spoken of the Chinese in derogatory terms.
Councillor Gavin Clayton said Trinity College was unlikely to succumb to bullying given its wealth and position. He agreed with the motion and also with the point that it should go further in calling for the pension fund to divest from fossil fuel investment.
Councillor Dr Tumi Hawkins said objections raised to the motion were disappointing; the question of divestment could be put; and reference to Texas was not a like comparison. She supported the motion.
Councillor Brian Milnes said the Council’s recognising that the pension fund should divest would give a strong signal on behalf of residents. The antediluvian views expressed were not representative.
Councillor Martin Cahn said the pension fund committee had a green orientation but needed the support of participant local authorities. It had a duty to its pension holders, so this motion was appropriate for this council to endorse. He agreed that the motion should include a call to divest.
Councillor Heather Williams said she supported the motion but agreed it should call for divestment. She added that not everyone agreed but everyone who wished to express an opinion should be able to do so.
The Chair said there were rules of debate and all were free to express themselves as they wished elsewhere.
Councillor Anna Bradnam, Vice Chair, asked whether Councillor Geoff Harvey should be invited to change the wording of the motion.
Following consideration of options to amend the wording, Councillor Geoff Harvey agreed to wording suggested by the Chief Executive to add the words “including the issue of divestment,” to the last paragraph of his motion. Councillor John Williams as seconder agreed to this alteration.
A vote being taken by affirmation, with one vote against (Councillor Deborah Roberts),
Council AGREED the following motion:
Fossil fuel divestment was once viewed as a moral undertaking; now it is as much about reducing financial risk. In October last year, Cambridge University finally announced its aim to have no meaningful exposure to fossil fuels in its investment funds by 2030. A University report summarised the long-running debate and included this recollection from visiting American environmentalist, Bill McKibben that …. Exxon built rigs to account for climate change-related sea rise while funding climate change denialism research (Oreskes and Conway 2010). He commented “intellectual dishonesty on that scale would get you kicked out of Cambridge in a minute”. But alongside the moral arguments, were those of sound finance: ‘Overall, there is little evidence to suggest that a global portfolio invested to exclude fossil fuels would underperform one that included them and such a portfolio might avoid the volatility that is likely to affect the fossil fuel sector in the coming years.’
It has been calculated that were oil companies to extract all oil in their existing developed reserves (oil fields), this alone, when burnt, would use up the remaining available carbon budget before breaching 1.5 degrees Celsius global temperature rise compared to preindustrial levels. Yet oil companies continue with oil exploration. Last year, BP announced a £14billion asset write-down acknowledging a shift towards renewable energy. There is a real risk of remaining invested in assets that will become stranded assets; the ownership of oil reserves that will now have to remain in the ground. In 2015, UK local authority pension funds lost nearly £700milion when the market for coal collapsed. Mark Carney, the governor of the Bank of England, issued a blunt warning in 2015 that investors, like pension funds faced “potentially huge” losses as action on climate change could make vast reserves of oil, coal and gas “literally un-burnable”.
This Council has declared a climate and ecological emergency. We now know Investments in fossil fuels are not only harmful to the environment but also put the sustainable future of pensions at risk.
In December last year, the National Climate Change Committee released a paper ‘Local Authorities and the Sixth Carbon Budget’. It lists 9 ‘overarching priorities’ for local authorities and one of these relates to pensions schemes investments. ‘Local authority pension funds should disclose their approach to assessing and managing climate risks and should consider investing in Net Zero aligned schemes within their legal duties.’ This aligns with Clause 124 of the Pension Schemes Bill currently before Parliament where the Act is likely to mandate larger private sector pension schemes to manage climate change as a financial risk and to report publicly on how so.
We note from the Investment Strategy Statement of the Cambridgeshire County Council Pension Fund, ‘The Fund supports the principles of the [Financial Reporting Council] UK Stewardship Code and is working with the Fund’s advisers with the intention to sign up to the Code.’
We further note: this Code requires ‘Signatories systematically integrate stewardship and investment, including material environmental, social and governance issues, and climate change, to fulfil their responsibilities.’
The Pension Fund Committee, in partnership with Investment Sub Committee and Local Pension Board decides pensions investment strategy. Nevertheless, SCDC staff pensions are part of a Defined Benefits scheme, meaning that SCDC has a financial interest in the long-term efficiency of the fund since any future shortfall, including by failure to recognise any risks (or investment opportunities) associated with climate change, would be set against a balance sheet liability. Fiduciary obligations are aligned with the UK´s legal obligation to meet its climate goals. As a UK´s Pension Minister said of the Climate Change Act: “This legislation commits the UK to a path that pension funds must play a massive role in” which means no longer helping fund oil production and exploration and keeping within the remaining carbon budget.
This Council
- Asks the Chief
Executive to write to the Pension Fund Committee, Investment
Sub
Committee and Local Pension Board jointly, to request how they, on
behalf of SCDC
as an employer, intend to manage the effects of climate change as a
financial risk to
their investments, including the issue of divestment, and how this
will be reported.