Activists lobbying US university endowments to divest from fossil fuel should reconsider their stance, as divestment does little to address a polluting company’s carbon output, the chief executive of French pension fund ERAFP has said.
Philippe Desfossés, head of the €16bn supplementary scheme for civil servants in France, also criticised fellow pension investors for long being “sleeping partners” in failing to engage with firms, and echoed comments by a trustee of the UK’s BT Pension Scheme that pension funds could lower carbon emissions by financing a more inter-connected European power grid network.
Speaking at a RobecoSAM conference near Zurich, Desfossés noted attempts by US student bodies to have their university endowment divest from fossil fuel companies and was critical.
“If you want to lower the carbon intensity of your portfolio by selling your stocks, what does it mean for the guy who has to buy your stocks?” he asked.
“You won’t reduce, on a global basis, the carbon intensity, if you are selling the stocks to someone else.”
The chief executive said it was more important to wait for a time when a company was raising capital to bring about change.
“At that moment, maybe you can exert some pressure,” he added.
His comments come after collective action was taken by a number of charitable trusts and US endowments.
To coincide with the recent UN Climate Change conference in New York, the coalition, led by the $860m (€680bn) Rockefeller Brothers Trust, said it would divest its fossil fuel holdings.
Desfosses repeatedly said that while focusing on specific niches of an investment universe was viable for smaller entities, those with more than €10bn needed to examine the entire investment universe and seek to rectify any perceived flaws through its behaviour.
ERAFP pursues a ‘best in class’ investment strategy, opting to focus on companies that perform well in select categories rather than actively divesting companies.
Desfosses also criticised the laissez faire approach taken by the pension industry on matters of engagement.
“The truth is, pension funds have been sleeping partners,” he said. “They did not engage, they did not vote sometimes – and this has to change.”
He also echoed comments by Donald MacDonald, chairman of the Institutional Investors Group on Climate Change (IIGCC), by arguing in favour of institutional investment to better connect national power grids across Europe to minimise wastage.
“We are focusing sometimes on very minor things,” he said. “That’s not to say wind farms are not important, but just an efficient grid in Europe could save a lot of energy and a lot of money.”
Desfosses, also a board member at the IIGCC, said the group was arguing in favour of change, but that the European Commission had yet to implement the proper framework to attract investment, distracted by other matters.