Strathclyde Pension Fund, Scotland’s £24bn (€28bn) public sector pension fund, has agreed to adopt a policy of divesting fossil fuel companies where they do not meet certain climate change-related standards.
It announced the decision yesterday after a meeting of the pension fund committee, saying the move was agreed in response to a call from Glasgow City Council, its biggest participating employer.
In April, Glasgow City Councillors voted by a majority of 69 votes to 4 in support of divesting the pension fund from fossil fuels, but only the pension fund committee is competent to enact divestment from fossil fuels. Glasgow is the host city of the COP26 UN climate change summit in November.
Campaigners found fault with Strathclyde’s announcement, but for different reasons.
Friends of the Earth Scotland, which has been campaigning for fossil fuel divestment at Strathclyde, said the pension fund had “deferred a decision” about what to do with its fossil fuel investments. According to the NGO, these amount to some £500m.
The Make My Money Matter campaign, meanwhile, lamented the lack of a commitment to align with the 1.5°C ambition of the Paris climate change agreement.
“Strathclyde Pension Fund’s announcement that they are ‘putting fossil fuel companies on notice’, while welcome, is far from the urgent action that the planet – and their own members – need,” said Tony Burdon, campaign CEO.
Greater direct impact elsewhere?
The pension fund said its climate strategy already reflected the Paris agreement, but that the decision to adopt a fossil fuel divestment policy “signals the fund’s readiness to align its wider investment strategy to those same goals – and the new, ambitious action that the international community expects to be agreed in its home town this November”.
“We also understand that some of those traditional energy firms are now at the forefront of investing in a low carbon future – but responsible, forward-thinking companies will welcome Strathclyde setting a high bar.”
Councillor Richard Bell
Councillor Richard Bell, who chairs the pension fund committee, said the pension fund’s direct investments in renewable energy “dwarf our interests in industries like oil and gas”.
Continuing to back renewable energy, and “using its clout as a shareholder to push for better environmental outcomes” were how the pension fund could perhaps have “the greatest direct impact on the climate emergency”, Bell said.
He added: “We also understand that some of those traditional energy firms are now at the forefront of investing in a low carbon future – but responsible, forward-thinking companies will welcome Strathclyde setting a high bar.”
“Ultimately,” he continued, “this is about saying that we won’t stand for companies putting our investment – and the retirement savings of hundreds of thousands of our members – at unnecessary risk.”
The next step for the pension fund, with respect to the divestment policy, is to carry out an assessment of energy sector companies and set minimum standards, in consultation with its investment managers and Sustainalytics.
Where companies were assessed as failing those standards, the pension fund would divest, it said, adding that the committee had agreed “this should be completed as quickly as possible and while ensuring no detriment to financial stability”.
The pension fund also said it would seek to collaborate with other funds that were beginning to introduce divestment policies, such as the New York State Pension Fund.
The US pension fund last year set a 2040 net-zero target for its portfolio emissions, saying the riskiest energy sector companies could be divested as part of this.