UK Parliament pension fund rejects call to assess fossil fuel investment

Refusal comes despite party leaders’ major climate pledge

The pension fund for the UK Parliament has rejected calls to review its investments in fossil fuels – despite the leaders of the UK’s three main political parties signing a joint pledge to tackle climate change over the weekend.

In a letter seen by Responsible Investor, Brian Donohoe, chairman of the Parliamentary Contributory Pension Fund (PCPF), has responded to Green Party MP Caroline Lucas who had asked for a meeting with the PCPF to discuss the integration of climate and carbon risk into its investments as well as more transparency about its exposure to fossil fuel companies.

Lucas’ letter, co-signed by 12 other parliamentary figures, also raised concerns about the fund’s investments in the fossil fuel industry and the risks from effective climate regulation.

In response, Hymans Robertson, investment adviser to the PCPF and the MPs who are trustees of the fund met to discuss the issues raised by Lucas. Chair of the fund Donohoe had initially said he did not think fossils fuels are an investment that the £481m (€647m) fund should avoid.

And in a letter to Lucas, Donohoe says the trustees have decided that they cannot exclude investment in fossil fuels industries from their investment portfolio as trustees “are required to act in a way that would not be to the financial detriment of the scheme”.

Focusing on the ethical argument, rather than the financial risk factors raised by Lucas, Donohoe says lawyers have advised the trustees that there is a generalobligation on trustees to act in the interest of all their beneficiaries and that the likely range of views among PCPF’s members would make it impossible for the trustees to conclude that scheme members would share a “moral viewpoint” in one area of investment.

Lucas’s letter had focused on the humanitarian and environmental risks of fossil investment, but also highlighted the risk of significant financial implications for pension funds in the case of climate regulation.

The release of the letter came as Prime Minister David Cameron, Deputy Prime Minister Nick Clegg and opposition leader Ed Miliband put out a joint pledge to tackle climate change. They would “work together, across party lines, to agree [UK] carbon budgets”, and “to accelerate the transition to a competitive, energy-efficient low-carbon economy and to end the use of unabated coal for power generation.”

The highly unusual cross-party statement, coinciding with Global Divestment Day, drew praise from figures such as Al Gore, Unilever’s Paul Polman, Aviva CEO Mark Wilson, leading climate economist Lord Stern and Siemens chief Juergen Maier.

Meanwhile, Lucas had tabled an early day motion (EDM) for debate in Parliament asking the trustees of the PCPF to quantify and review its investments in fossil fuel industries. The EDM, which must get a large number of signatures to be considered for debate, currently has 16 signatures, though none from the ruling Conservatives.