OIC’s Pension Fund Loses £1,625,133 Investing In Fossil Fuels

Eleven local authorities in Scotland continue to invest in fossil fuels via their Pension Funds.

Orkney Islands Council’s (OIC) Pension Fund has reached £450,562,319 with the contribution from its fossil fuel investments coming in at 2.1%. This is despite OIC declaring a Climate Emergency in May 2019.

The value of the 2.1% of those fossil fuel investments in money terms is £9,303,106 and is part of a downward trend due mostly to the fall in value of fossil fuels.

Putting the climate issue aside briefly and looking at this from a financial viewpoint, fossil fuels are not a good investment for our public money.

OIC lost £1,625,133 (2017 – 2020) because those shares have fallen so much in value.

A statement issued by Orkney Islands Council says:

“Many former and current staff do, and will, benefit from pensions from Orkney Islands Council’s Pension Fund and our specialist fund investment managers are tasked with ensuring this continues into the future.

“The OIC Pension Sub-committee delegates investment decisions to the fund investment managers on its behalf. In the day-to-day management of the Council’s Pension Fund investment portfolios and related activities, the fund investment managers take into account Environmental, Social and Governance factors when buying, selling or retaining assets.

“The managers have statements setting out their policies in this regard and environmental issues are among the factors considered when making these investment decisions.

“There are costs associated with any withdrawal from asset classes and those also have to be considered by the fund investment managers when reflecting on the reallocation of invested funds.”

Leslie Manson, Chairman of the Council’s Pension Sub-committee said:

“The Council is very alert to the topic of climate change and responsible investment, having declared a climate emergency in May 2019. The Council also requires all managers appointed to manage assets for the Pension Fund to be signatories to the United Nations Principles for Responsible Investment (UN PRI).”     

Orkney Islands Council’s Investments in BHP

One of the companies OIC invests in is mining company BHP. This massive company based in the UK and Australia jointly owns the Cerrejon coal mine in Northern Columbia. The largest open cast mine in South America.

The people who live in the area where the mining takes place have suffered from poor air and water quality. The mine was started way back in 1976 and its development has involved the destruction of whole villages – the homes of  local indigenous and Afro-Colombian people.

The OECD (Organisation for Economic Development) are investigating the abuse of Human Rights with the expansion of the Cerrejon mine. This follows a damning report by the United Nation’s (UN) special rapporteur on human rights and the environment David Boyd. He said that Cerrejon had seriously damaged the environment and the health of the Wayuu, Colombia’s largest Indigenous group.

OIC investing in BHP, a company now under investigation for Human Rights abuses at the Cerrejon coal mine, is environmentally and ethically wrong.

Scotland’s local government pension fund is the country’s largest store of public wealth and is worth £48billion. Because of the fall in the value of coal, oil and gas £194million has been wiped out of that investment.

It makes no sense financially to continue to invest and lose money.

OIC Councillor Steve Sankey, Orkney Greens said:

“The Orkney Greens recognise the urgent need to divest from fossil fuel companies in the immediate future, and I’ll be working closely with my colleagues within OIC Committees to ensure that Environmental, Social and Governance issues are given more prominence in our investment decisions in the years ahead.

“In recent years OIC has amended its investment strategies to ensure that all OIC fund managers now have membership of the UN Principles of Responsible Investment. We see this as a positive base for further movement towards divestment away from fossil fuel companies, based partly on their fiduciary performance as well as ESG matters. This will feature as an important part of our Climate Emergency actions in our manifestos for Council elections next year in Orkney.”

Robert Noyes, one of the researchers and authors of the report, ‘Divesting to Protect our Pensions and the Planet’ published by Platform, said:

“After a decade of austerity and the devastating economic impact of Covid across the UK, local councils can and should be using their pension funds to support local investment priorities.

“Instead of making risky bets on fossil fuels, let’s channel the wealth in our pensions to local communities and build a better world beyond the pandemic. Whatever your stake in your pension – imagine what world you want to retire into – and push your pension to invest in it.”

The report shared by Friends of the Earth Scotland (FoES) has revealed that none of the 20 Scottish councils that have declared a climate emergency have taken action to end their investments in the coal, oil and gas firms.  £194 million of value was wiped off the oil and gas investments of the Scottish council pensions between 2017-20 with the Strathclyde Pension Fund alone losing £46 million. 

This year, Glasgow is set to host COP26, the United Nations Climate Change Conference.

Ric Lander, Divestment Campaigner at Friends of the Earth Scotland, commented:

“With the world coming to Scotland this Autumn to negotiate action on the climate crisis, pension funds now have a clear deadline for addressing their polluting investments. Local councillors have the opportunity to show leadership on climate action by telling fund managers to divest from fossil fuels.

“Many local authorities have declared a climate emergency and have plans in place to bring down emissions from transport, buildings and waste. Pension fund investments are currently working against this progress by continuing to back the ageing fossil fuel economy.

“Scottish council pensions are directly invested in the continued search for new fossil fuels through their ownership of companies like Shell and BP. This drive is undermining efforts to curb the climate emergency here in Scotland and doing untold damage to vulnerable communities around the world.

“Local authorities have the power and duty to ensure local workers have a pension for their retirement, but also a future worth retiring into. Instead of stubbornly sticking with old systems of investment that worsen climate breakdown, councils should boost investment in renewable energy and social housing.”

Credit FoES

Stephen Smellie, Deputy Convenor of UNISON Scotland, the largest union representing local government pension fund members, said:

“It is disappointing that the people who manage the pension funds of local government workers are oblivious to the climate crisis that is facing us. Workers care deeply about a sustainable future for their children, and if pension funds consulted with the people whose money they are investing they would know that. Instead, they continue to be part of the climate crisis problem rather than being part of the solution that they could be if they increased investments in sustainable alternatives.

“The value of the fossil fuel investments is high but only a small percentage of the funds’ overall investments so there is no financial justification for maintaining investments in coal, fracking or further fossil fuel exploitation.”

“There is a moral and ethical case for divesting from polluting fossil fuels. But there is also a firm financial case to remove workers’ pension funds from investments that will lose value as the world moves to a low-carbon economy which is less dependent on fossil fuels.”

Reporter: Fiona Grahame

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