This content is from: Portfolio

U.K. Government Pensions Told to ‘Go Green’

The trade union for British civil servants is calling on local government pension funds to dump fossil fuel companies.

The U.K.’s public service trade union will campaign for local government pension funds to divest from companies that profit from carbon emissions.

In a statement released Wednesday, Unison told its 1.3 million members to “push for changes” in the investment of their pension funds by lobbying for schemes to sell shares and bonds of fossil fuel companies and go “carbon free.” The union estimates that there are currently five million members in U.K.’s Local Government Pension Scheme, with more than 13,000 employers sponsoring these schemes.

James Anthony, chair of Unison’s policy committee, said pensions had a responsibility to safeguard members’ futures. Investing in companies that burn fossil fuels like coal, oil, and gas is at odds with that duty, he argued.

“This campaign empowers people to hold their pension funds to account,” he said. “If you contribute to a pension then it’s your money that’s being invested, and so it’s only right that you should have a say in where it’s invested.”

According to Unison, new U.K. government rules have raised costs for companies in industries deemed high-polluting, reducing their appeal for some investors. Meanwhile, the group said that emerging clean and green technology has created “new and lucrative business opportunities” for pension funds.

The campaign comes as asset owners and fund managers become increasingly vocal about divesting from companies which are not taking sufficient steps to manage climate risks.

In May, representatives from RobecoSAM and PGGM Investments were among the investors to call for change at the Royal Dutch Shell annual general meeting. Six months later, the oil giant outlined plans to cut its carbon footprint in half by 2050.

[II Deep Dive: Investors Victorious in Shell Climate Fight]

Mark van Baal, founder of shareholder action group Follow This, said Unison’s request for fossil fuel divestment was a “fair ask.”

“Fossil fuel companies are not only putting the climate at risk, but also the value of the pensions of their members,” he said. “Thanks to these campaigns, pension funds and fossil fuel companies start to realize that every dollar invested in more oil and gas is wasted.”

In 2017, activist groups, Community Reinvest, Friends of the Earth, and Platform published a joint report which estimated that £16.1 billion was invested in the fossil fuel industry by local government pension funds.

The move by Unison to divest from this industry is about more than doing the right thing for the environment, said Chad Slater, joint chief investment officer at Morphic Asset Management.

“It is about what in the future is likely to be deemed as their fiduciary responsibility to divest,” he explained. “The concept of fiduciary duty has evolved over the years. Fiduciary duty currently does not incorporate climate change, but the tide is moving against it.”

Slater added that global warming projections mean oil and gas companies without a climate transition policy will likely face the prospect of having to make large write-offs of assets in the future.

“For us, it becomes difficult to imagine how a trustee of a Local Government Pension Scheme would meet updated fiduciary standards and invest in carbon emitters,” he said. “As such we are big supporters of the Unison campaign.”

Related Content