A new report from Friends of the Earth comparing climate risk performance of local government pension funds has found that West Midlands Pension Fund (WMPF) is inadequately preparing for financial risks associated with climate breakdown. The report places WMPF in the second lowest category of funds – those that acknowledge the risk of climate breakdown but have taken inadequate action.
These funds are taking some action, but these are heavily reliant on unclear or ineffective engagement strategies. These funds need to expand out of their overly narrow focus on engagement, and also ensure that engagement activities have clear goals and deadlines. These funds’ failure to address climate risks adequately puts them at serious risk of breaching their fiduciary duty.
Climate breakdown is urgent
Last month the Intergovernmental Panel on Climate Change issued its latest report warning that the planet is expected to reach 1.5 degrees within as little as 12 years. One billion people will regularly endure conditions of extreme heat. Sea levels will rise exposing up to 69 million people to flooding. Up to 90 percent of coral reefs will die. Fishery catches will decline by 1.5 million tons.
Extreme and urgent actions are required. Notwithstanding that the world into which pensioners retire will be significantly affected by climate breakdown, local government pension funds are challenged with serious financial risks. To avoid the more catastrophic effects of climate breakdown, much of the proved reserves of the fossil fuel industry will have to remain in the ground.
Despite assurances to shareholders, the fossil fuel industry is putting the brake on meaningful action from policymakers by pouring millions into lobbying efforts, notably in the US midterms where unprecedented political spending helped it to defeat several green policies. Shareholder engagement is not successful at changing the core business model of companies, so it is time for local government pension funds to completely divest from fossil fuels.
WMPF must divest from fossil fuels
West Midland Pension Fund administrators have ignored the call from Birmingham City Council to divest. The remaining member regions including Coventry City Council now need add their voice and force WMPF to protect their stakeholders and divest from fossil fuels. Not doing so is to ignore what the UN chief calls the ‘direct existential threat‘ of climate breakdown.