Why is the West Midlands still funding the climate crisis?

The Covid-19 pandemic has put colossal pressure on the fossil fuel industry. In the last few months oil prices have gone negative and then bounced back to hover at a very low price. Major oil companies like Shell, BP and Total have announced their reserves are worth much less than expected, wiping billions off balance sheets. Profits have been cut, and share prices have slumped.

Meanwhile, divestment campaigns targetting Local Government Pension Funds around the Midlands have seen successes. In the past few weeks, two councils have passed divestment motions:

  • Shropshire Council (Tory-controlled) voted in support of a divestment motion calling on the county pension fund to divest from fossil fuels over a 3 year period
  • Chesterfield Borough Council unanimously passed a motion yesterday calling on the Derbyshire Pension Fund to divest from fossil fuels and to engage better with members on investments

Significantly, both of these funds are members of the LGPS Central pool, putting pressure on West Midlands councils to push West Midlands Pension Fund to divest the £ millions that it invests in fossil fuels.

We look forward to more councils in the West Midlands joining Dudley and Birmingham in stepping forward to call on WMPF to divest from fossil fuels.

The divestment motions make interesting reading, both referencing the climate emergency motions recently passed by their respective councils. We look forward to hearing from councillors in Wolverhapton who have similarly passed a climate emergency motion but have yet to call for divestment.

The text of the divestment motions passed by Shropshire and Chesterfield councils are copied below.

DivestWMPF would like to thank and congratulate the campaigners who have pressured their councils into passing these motions, and we stand in solidarity with them as they push for their Pensions Committees to update their investment strategies to formalise divestment commitments.

West Midlands Pension Fund Pensions Committee claim that continuing to invest in fossil fuel companies and “engage” with them is responsible. It is not. It is financially reckless and ethically unjustifiable. Growing numbers of people are realising that the best way to preserve our future is to divest before it is too late. We hope WMPF will join them.

Shropshire Motion

Council notes:

  • Shropshire and Telford & Wrekin Councils have both declared climate emergencies and pledged to be net zero by 2030.
  • Shropshire County Pension Fund (SCPF) currently has around £294 million invested in fossil fuel companies including Shell and BP and through asset manager BlackRock.
  • These investments are incompatible with the climate emergency declaration and the councils’ commitment to reach net zero within the next ten years.
  • Fossil fuel investments are financially risky as a result of both the Covid19 pandemic and the global transition to a more sustainable economic and environmental model. They are now being consistently out-performed by renewables.
  • Former Bank of England Governor Mark Carney warned in December 2019 that fossil fuel investments risk becoming “stranded assets” (i.e., worthless) as investors exit the sector. “A question for every company, every financial institution, every asset manager, pension fund or insurer – what’s your plan?”
  • The ‘engagement’ approach does not mitigate the financial risks the sector faces. There is also no evidence of any multinational corporation changing its core business model in response to investor pressure.

Council believes it is time for Shropshire’s flagship pension fund to commit to divestment from fossil fuels over a three year timeframe.

This would:

  • Allow for the development of ‘impact investment’ directed towards internationally recognised sustainable development goals and/or investment in a local sustainable economy.
  • Provide for a more sustainable future of all pension fund stakeholders.
  • Provide leadership in the face of the climate emergency.

This Council resolves:

To instruct the Acting Chief Executive to write to the Pension Fund Committee asking the Committee to follow best practice by;

  1. Adding a statement to their strategy that climate change constitutes financial risks to the fund.
  2. Setting a 3 year timescale for the reinvestment of funds currently invested in fossil fuel dependent assets.
  3. Developing an investment strategy consistent with sustainable development goals and developing a local sustainable economy.

Finally we recognise that fossil fuel investments constitute part of the councils ‘carbon footprint’ and so resolve that this element should be reported on within our greenhouse gas reporting for Scope 3.

Chesterfield Motion

Having declared a Climate Emergency, this Council commits with the Derbyshire Pensioners Group, Transition Chesterfield, Friends of The Earth and Divest Derbyshire in calling for the Derbyshire Pension Fund to disinvest its remaining funds in Fossil Fuels companies and to invest in Renewable Energy companies instead.”

In addition we are calling for the Derbyshire Pension Fund to strengthen engagement regarding future investment principles with all stakeholders including pension fund members and employers.

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