Pension fund divestment from fossil fuels could ‘only superficially improve’ council’s green credentials

Bedford Borough Council has been told the divestment of pension funds is reducing pressure on businesses to accelerate their transition to net zero.

In January, councilors voted unanimously to ask the Bedfordshire Pension Fund to divest from fossil fuels.

A member of the public, Mr. Eric Cooper, asked the Climate Change Committee (Monday May 9) if the council had taken this step.

Bedford Mayor Dave Hodgson said: ‘We have written to both Borders to Coast and the Bedfordshire Pension Fund.

“We have received a response, and I will ensure that it is conveyed to this committee and to the council, as well as to Mr. Cooper.

“These are detailed responses, so I’m not going to read them because they’re five pages in total,” he said.

Copies of both letters have been sent to the Local Democracy Information Service.

Bedfordshire Pension Fund chairman Doug McMurdo wrote that the pension fund committee takes its climate change responsibilities “extremely seriously” and that the committee views climate risk as one of the “most serious risks”. important” to the long-term value of the fund.

In September 2020, the committee agreed on a set of responsible investment beliefs.

At the heart of these beliefs is the principle that engagement with beneficiary companies, rather than divestment, is the best approach, McMurdo wrote.

He added that the Fund does not believe that excluding a particular sector from an investment strategy is an “effective or appropriate” mechanism for managing risk.

Adding this divestment reduces pressure on the sector to change its behaviors and accelerates the transition to net zero, making it “more difficult to drive change”.

McMurdo explained that even if the fund were to divest completely from fossil fuel companies, there would continue to be significant exposure to fossil fuels through other portfolio investments.

He concluded by writing that the fund believes there must be a “fair and equitable transition” to a low-carbon economy, so that communities dependent on carbon-intensive industries and sectors do not become “districts left behind and forgotten”.

Chris Hitchen, Chairman of the Board of the Border to Coast Pensions Partnership, also wrote that excluding sectors is not an effective way to achieve long-term climate goals.

He added that while such an approach may “superficially improve” an individual portfolio’s green credentials, it does not remove the underlying risk of climate change.

As ‘long-term investors’, Mr Hitchen wrote that Border to Coast has decided to use the strength of its collective voice to influence companies to drive change in the businesses in which it invests.

We are committed to achieving net zero emissions across all of its investment portfolios by 2050, if not sooner, he added.

Border to Coast is due to release its net zero roadmap in the fall. This will outline the investments that will be managed in line with net zero and include interim targets for 2030.

The mayor said: “We will have to review what our next steps are when [councillors] I have seen these replies.

by John Guinn
Local Democracy Journalist

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