Author: Divest WMPF

This September a campaign coordinated by DivestWMPF resulted in over 40 letters being sent to the WMPF Pensions Committee demanding divestment from the fossil fuel companies that are driving the climate crisis.

Letter writers received a statement from the fund on how they are taking action on climate change. Our full response is being sent to the Pensions Committee and letter writers. Here are our responses to some of the Pension Funds’ points:

‘The Fund continues to believe that engagement is more likely to lead to decarbonisation than a divestment approach. There is no evidence that giving up the opportunity to influence investee companies is likely to lead to superior environmental outcome.’

When looking at ‘engagement’ we cannot leave aside the historic role that fossil fuel companies have played in the production of carbon emissions, in the obfuscation and suppression of science, in the creation of thinktanks to invalidate and create uncertainty around causes of climate change, the denial of their involvement in it and then the billions spent on deliberately misleading advertising and lobbying against climate policy.

However, it is important to focus on positive outcomes where they exist and Divest WMPF would welcome clear evidence of positive outcomes resulting from WMPF’s engagement.

The Fund states that: ‘LAPFF engaged with 170 companies in 2019’ and ‘Last year Hermes EOS has engaged with 141 companies on the matter of climate change’. It would be helpful to us if we could better understand the nature of that engagement.  Which are the companies that have been engaged with and what is their core business? Are all of the companies mentioned fossil fuel companies? 

Further to this, on what basis is the ‘engagement’ being deemed fruitful? Can the Fund provide a few examples of successful engagement? For example, a measured reduction in CO2 emissions or investment in renewable technologies in alignment with the goals of the Paris Climate Accord or, ideally, the IPCC report of 2018. In what quantifiable ways has the behaviour of the fossil fuel companies changed as result of the Fund’s engagement? 

And, crucially, on what basis will engagement be deemed to have failed? Again, can the Fund provide examples of where investment has been reallocated or withdrawn on this basis?

Divest WMPF is conscious of the fact that it needs to relay this information to members of the public invested in the Fund and, for this reason, it would be very helpful if the information provided could be in a form that is clear, simple and easily digestible.

‘We are pleased to see a number of oil and gas companies continue to step up their response to climate change. In February 2020 both Rio Tinto and BP pledged to cut their greenhouse gas emissions to net zero by 2050.’

It is true to say that BP has this year adjusted its business model to take account of the future threat of climate change. However, it is imperative that we look closely at the detail of that change and when we do, we can see that their pledge applies only to some of its practises and not others. For example, the changes do not include BP’s 20% stake in Rosneft which makes up 40% of the company’s oil production and 15% of its natural gas. 

A report by the Transition Pathway Initiative (TPI), an organisation you cite in your statement, found that BP’s pledge would not cut the company’s emissions by the stated 50% but would in fact result in a reduction of less than 30% by 2050. The same report goes on to confirm that none of the major oil companies align with the Paris Climate Accord. All, on current pledges, will help to ensure that the planet does warm by more than the critical 2 degrees centigrade.

All of which raises the question: Is engagement the most effective route to achieving these shared goals of reducing emissions and safeguarding the future of the planet?

When young people learnt that 40% of their exam grades were to be downgraded, it was striking to see protesting students holding placards reading “Give us fair grades not broken futures” and “How can I value a system that doesn’t value me?”. Leaders are failing young people on exams, and they are failing them on climate breakdown. This is a generation which will not roll over and have their future stolen, and this week has shown us that when they rise up, they are unstoppable.

And yet their future is still being overlooked by councils across the country as they continue to green light huge investments in fossil fuels which are driving the climate crisis and denying them a safe future. Here in the West Midlands, despite calls to divest from fossil fuels, councillors sit in pensions committee meetings and rubber-stamp a destructive policy of investing in these dirty fuels. They greenwash this policy by instead “engaging” with the fossil fuel companies, despite any evidence that this will make any difference to their fundamental business model, without any targets and without any sense of the urgency of scaling down these investments. The failure of “engagement” is demonstrated this week by a huge spike in Facebook advertising spend to convince Americans of the need to keep burning oil and gas following climate policy announcements by presidential candidate Joe Biden. If BP and Shell are serious about their climate pledges, why are they still fighting climate policy?

How are pensions holders benefiting from these investments? Traditionally pensions funds like investing in fossil fuels because of dividend, but this year Shell cut dividend payments by 66% and BP cut dividends by half. WMPF is also at risk of a price crash. In 2015, the price of coal collapsed, costing local government pension funds £683 million in losses.

The fossil fuel industry knows it is threatened by combination of falling renewable technology costs and climate policy by governments. This has driven a welcome but decades-late net-zero pledge by BP.  Companies like BP do not change their ways when pension funds ask them politely.  They do, however respond when divestment starts having a material impact on their bottom line. They do respond when they can’t hire staff because their toxic business model is exposed by divestment.

Divestment protects local government pension holders and the taxpayers who underwrite their pensions. Divestment sends a strong message to the market that society will not tolerate the climate being destroyed by their actions. And divestment protects young people in the West Midlands who expect to be treated fairly and who will not stand for a degraded planet ravaged by the lethal effects of global heating.