Analysis: Member’s climate case against Shell pension fund falls at first hurdle

Pensions Ombudsman rejects complaint from beneficiary

The case brought by a pension beneficiary against a Shell pension fund over access to climate change information has been rejected.

The Pensions Ombudsman, the UK body that investigates complaints about pension administration, has rejected the complaint by former Shell employee Christoph Harwood. He had said the Shell Contributory Pension Fund was not providing him with information about how it is taking the potential risks of climate change into consideration.

"I can see no breach of a positive disclosure duty or maladministration" – Karen Johnson

In a five-page ruling, Deputy Pensions Ombudsman Karen Johnson said the information Harwood (referred to as ‘Mr D’) was requesting “goes far beyond what the Trustee is required to provide” under regulations.

“I can see no breach of a positive disclosure duty or maladministration,” Johnson wrote. “I do not consider that there is evidence to indicate that the Trustee is deliberately trying to stop Mr D from having information on the fund.

“On the contrary, the Trustee arranged for Mr D to meet with senior members of staff from the fund and sponsoring employer [i.e. Shell].

Johnson notes that the fund “has tried to reassure Mr D by explaining that only 1% of the fund’s total assets are invested in the equity of companies associated with fossil fuels”. It confirmed to him that “it considers the wider impact of climate change on investment strategy”.

The ruling means that what could – potentially – have developed into the basis of a test legal case for putting pension trustees on the hook over climate change will now not go forward.

It could have proved as seminal as the 1980s Cowan v Scargill and Harries v The Church Commissioners cases which have long influenced trustee behaviour.

In August 2018 ClientEarth, which was assisting Harwood, wrote to 14 UK pension funds that were identified as laggards by the House of Commons’ Environmental Audit Committee, saying they risked litigation if trustees “fail to develop their approach to climate risk in line with improving data and market practices”.

It said: “Your legal obligations in respect of climate risk are not static – advances in the evidence available on the financial risks of climate change, along with rapidly evolving market standards in responses to climate change-related risks, will be relevant to how a court would weigh your actions against your legal duties.”

"While this is a poorly reasoned decision, there are too many barriers related to time and costs for an appeal to be a viable option." 

Harwood, who is now a sustainability consultant, and ClientEarth have decided against taking the case to the High Court so this opportunity to create precedent has been nipped in the bud. 

ClientEarth Pensions Lawyer Joanne Etherton said it would be “unrealistic” to expect a pension scheme member to go up against one of the UK’s largest pension funds in the High Court.  

“While this is a poorly reasoned decision, there are too many barriers related to time and costs for an appeal to be a viable option.” 

As I wrote in August last year, the lack of actual hard litigation around trustees and climate change was starting to become a problem. There’s a similar case in Australia involving the Retail Employees (REST) which is currently going through the discovery process.

ClientEarth says that while the decision was not what Harwood had hoped for, the Shell fund had updated its Statement of Investment Principles (SIP) shortly after the complaint was filed. 

The SIP now states that SCPF incorporates financial risks relating to climate change into its scenario analysis for asset liability modelling.

The law firm is accusing the Ombudsman with not fully reading the complaint and is calling on it to review its internal processes. 

But the Ombudsman told Responsible Investor said it is an “impartial service which determines complaints on their individual facts, the law and the evidence, without favour”. 

“In Mr Harwood’s case, the Determination addresses a narrow point concerning the disclosure obligations; it makes no finding about the Scheme’s investment policy.”

The trustees of the Shell fund take legal advice from Shell International Limited and Hogan Lovells LLP while the assets are run by Shell Asset Management Company B.V. (SAMCo).

Aon Hewitt is both investment adviser and scheme actuary.