by Cllr Fiona Colley, Southwark Cabinet Member for Finance and Council Pension Fund Chair.

Data released on 9 November shows that the UK’s local authorities invest more than £16bn into companies that extract oil, gas and coal. Collectively, the country’s local government pension funds have nearly £3,000 invested in fossil fuels for every pension fund member. Southwark has decided we will no longer do this.

In December 2016, Southwark council pension fund made a landmark commitment. Following more than a year of consultation, deliberation and work with community groups we announced a decision to divest the £1.2bn fund from fossil fuels.

This was a decision based not just on our political and ethical concerns, but primarily on our belief that climate change and significant investments in fossil fuels present a long term financial risk to our fund. We are clear that our action to reduce the carbon exposure of our fund is wholly consistent with our fiduciary duties as pension fund trustees.

This move was not taken lightly, but we believe it is the right way forward. By backing divestment, councils can show leadership on climate change, protect public sector workers from long-term financial risk and seize the opportunity to invest in sustainable communities and the transition to a low carbon economy.

In December 2015 I first met with representatives of the local community group Fossil Free Southwark. The group was primarily concerned about climate change. In the days before the meeting, Storm Desmond had brought record-breaking rainfall to the region. Only a few days after our meeting, world leaders signed the historic Paris treaty to limit global warming to 2°C.

Fossil Free Southwark argued that it was a moral necessity to divest from fossil fuel companies, given their consistent hindrance of efforts to address climate change. While I was also concerned about the impacts of climate change, as a pension fund trustee I was particularly taken by their financial arguments.

In 2013, a landmark study brought the idea of “stranded” fossil fuel assets into public consciousness. It argued that up to 80% of known fossil fuel reserves cannot be exploited if we are to meet climate targets, making fossil fuel assets wildly overvalued in the long term. These risks are serious and increasingly understood by the financial mainstream; even Mark Carney, the governor of the Bank of England, has highlighted the risks of overvalued carbon.

In contrast, the renewable energy industry is flourishing and offers increasingly sound investment opportunities – just look at the rapid growth of offshore wind in the UK. Sure enough, when we surveyed the members of Southwark pension fund, results showed 46.7% wanted to invest in renewable energy.

Following careful deliberation, it became clear to me and my council colleagues that fossil fuel divestment would not represent a risk to the stability of the Southwark pension fund, but would instead be financially prudent and entirely consistent with the funds’ responsibilities.

And so, a year after my first meeting with Fossil Free Southwark, Southwark became the largest UK pension fund to commit to divesting from fossil fuel companies.

In the year since then, my colleagues and I have been working on what this will look like in practice; we’ve ensured that reducing fossil fuel exposure and investing in the future of the energy sector is incorporated into our investment strategy, and are now working on a plan to implement this. We hope that by working together with like-minded councils we can find ways to achieve our shared aims for positive and cost-effective investment of our pension funds.

Southwark has commissioned an in-depth assessment of the pension fund’s existing so we can measure progress in line with the divestment commitment. We have identified and are assessing a number of potential, low-carbon investments such as new passive equity funds being offered by Blackrock and also sustainable energy infrastructure funds.

But the administrative fees for these type of funds can be prohibitively high for any single pension fund, so we are working closely with like-minded Labour boroughs in London seeking to join forces to reduce these fees. Once our due diligence work has been done, and once we have negotiated acceptable fees, we expect to start the divestment within the next few months.

I hold the view that councils should be shifting their investment portfolios away from polluters and into a sustainable future. Recent motions passed by public-sector union Unison, and the Trades Union Congress echo this view.

While the current national government lacks any serious commitment to a just and sustainable future, it is the duty of councils such as ours to build this vision. By working for divestment, councils across the UK can stand up for workers’ pensions and the nation’s future, and use local power to call for a transition to a fair and livable world.

This article was originally posted on the Guardian.


Leave a Reply

Your email address will not be published. Required fields are marked *