Today’s news that the fossil fuel holdings of every local authority pension fund in the UK are to be disclosed by campaigners could prove a watershed moment in the evolution of climate investment.
As we are reporting, Fossil Free UK plan to release the details of 101 funds’ fossil fuel exposure and expose what they say are the “billions of pounds of public money” supporting the “destructive” industry. It’s a “key moment for us to take a stand” they say.
It marks the logical expansion of the college divestment campaign that has had a string of successes around the world and put institutions such as the Harvard endowment on the back foot. A similar process could be kicked off by the latest revelations.
By extension it will affect every asset manager and investment consultant operating in the UK market and set the tone for institutional asset management going forward, whether you are a local authority fund or not.
Fossil Free UK are going to shine a light on how the schemes invest a combined total of more than £225bn – meaning that for the first time we will be able to see whether the funds are putting their money where their mouth is on climate change.
The data will be released in September, when attention will start to shift towards the COP21 climate negotiations in Paris later in the year. Expect significant mainstream press attention from the likes of the Guardian, which has already a campaign in place at the Gates Trust and the Wellcome Trust.
For those who question the merit of the something like the Asset Owners Disclosure Project (AODP), this will be something on a whole other level. As Fossil Free says: “This could be the start of something big”.
The UK has a still largely fragmented system of local authority funds (there are various moves to consolidate it) and there are definitely some leading RI players, such as Greater Manchester for example, which has taken an active role in social investment.The most well known body in this space for those in the responsible investment area is probably the Local Authority Pension Fund Forum (LAPFF), which represents 64 funds with combined assets of over £115bn – a significant sub-set of the entire field.
LAPFF has of course been highly active in climate change over the years. It was a key mover in the ‘Aiming for A’ shareholder resolutions at Shell and BP and has engaged with the likes of Rio Tinto and others on climate change. As a body, it has supported greenhouse gas emissions disclosure resolutions at ExxonMobil and Chevron.
On top of this, several local authority funds are also members of the Institutional Investors Group on Climate Change (IIGCC), the European forum: Bedfordshire, Merseyside, Greater Manchester, Kent, West Midlands, West Midlands, South Yorkshire.
Bu there aren’t any UK local authority funds among the 62 investment organisations that have signed the PRI-led Montreal Climate Pledge, which incidentally has just reached its target of attracting US$3trn of combined assets under management.
Disclosure is often the starting point to action, as evidenced by the example of Norway. In that case Greenpeace and others put together a solid report that found the country’s giant sovereign fund had massive investments in coal. This gained wide media attention, and as the campaigners admit, allowed them to both shape and ‘own’ the debate. The issue eventually went to the very top and resulted in a historic decision at parliament.
Do not be surprised if the same happens in the UK context. No local authority fund can now say they weren’t warned!