Minutes:
Question 1:
Julie-Ann Booker, on behalf of Dorset Action on Pensions
In
considering the possibility of stranded assets, The Brunel Pension Fund Carbon
Metrics report analyses its potential relationship with fossil fuel reserves
both probable and proven, and then examines the potential emissions from these
reserves:
“Taking
the reserves exposures discussed above, we can look at an assessment of
potential future emissions that may incur from these reserves being realised.
This metric is not included in the WACI figure (which focuses on current
intensity) and so it is an important assessment of company's potential
contribution to emissions via its stockpile of fossil fuels. We have been able
to assess the potential emissions associated with the proven and probable
reserves for companies within our Portfolios, as well as an overall Portfolio assessment.”
(Brunel Pension Partnership Carbon Metrics report).
This
abstraction in the face of a climate emergency seems like madness to me. I am no finance expert but have done some
research and the Custom Benchmark appears to only relate to comparative
investment funds and pays no attention to the health of the planet or to the
science of climate change.
“It
is crazy that our banks and our pensions are investing in fossil fuels, when
these are the very things that are jeopardising the future we are saving
for”. (Sir David Attenborough, Nov
2020).
Sir
David is also not a financial expert, but is one of
the most respected naturalists on the planet and his message on fossil fuels is
quite clear. Dorset Action on Pensions (https://dtaction.co.uk/pension-divestment/)
feel that Dorset Council should stop investing in fossil fuels and start
investing in a greener future.
Is
Dorset Council seeking investments that are both good for the planet and good
for returns as demonstrated by six other local government pension funds, half
of all UK Universities, and over 1,250 institutions representing over $14.5
trillion in assets who have already committed to going fossil free (Nauman,
2020). Or is it in fact risking the
threat of stranded assets, and ignoring the health of the planet and the
science of climate change?
Answer 1
The Local Government Pension Scheme (LGPS)
is a national pension scheme administered locally. Dorset Council (DC) is the administering
authority for the LGPS in Dorset which provides pensions and other benefits for
employees of DC, other councils and a range of other
organisations within the county.
DC has
delegated its responsibilities as an administering authority to the Pension Fund
Committee, which consists of five DC elected members, three Bournemouth, Christchurch and Poole Council (BCP) elected members, and
one scheme member representative nominated by the trade unions.
The purpose of
the pension fund is to pay benefits to scheme members. The Pension Fund Committee has a duty to
scheme members and their employers to ensure that their contributions to the
pension fund are invested appropriately to make returns sufficient to meet
those obligations. This duty overrides any other considerations.
The
decarbonisation approach agreed by the Committee at its meeting September 2020
was based on evidence that such an approach will deliver significantly greater
reductions in the ‘carbon footprint’ of the pension fund’s investments that blanket
divestment, without negatively impacting returns.
The pension
fund’s investment pooling manager and underlying investment managers are
required to take into consideration all matters that present a financially
material risk to returns, including the risks that you highlight.
Question 2:
Colin Tracey
I understand that Dorset Council have agreed
to divest from fossil fuel companies at only 7% per year. That means it will not
be completely divested until 2036. Scientists are saying that we have only ten
years to try and keep global warming below 1.5 degrees. While Dorset council
pension funds are still being invested in fossil fuel companies Dorset Council
continues to contribute to global warming. As an elected body that has declared
a climate and ecological emergency, Dorset council has a moral and ethical duty
to respond to the crisis with more urgency.
How does the council propose to do this?
Answer 2
The Local Government Pension Scheme (LGPS)
is a national pension scheme administered locally. Dorset Council (DC) is the administering
authority for the LGPS in Dorset which provides pensions and other benefits for
employees of DC, other councils and a range of other
organisations within the county.
DC has
delegated its responsibilities as an administering authority to the Pension
Fund Committee, which consists of five DC elected members, three Bournemouth, Christchurch and Poole Council (BCP) elected members, and
one scheme member representative nominated by the trade unions.
The
decarbonisation approach agreed by the Committee at its meeting September 2020
was based on evidence that such an approach will deliver significantly greater
reductions in the ‘carbon footprint’ of the pension fund’s investments that
blanket divestment, without negatively impacting returns.
Divestment is
effectively a transfer of ownership that does not directly lead to a reduction
in either the supply or demand for fossil fuels but it does remove the
opportunity to influence companies by working with them to transition to a
lower carbon future. Targeted divestment remains an option from
individual companies who will not positively engage.
Significant decarbonisation has been and
will continue to be achieved through the transition of assets to the management
of Brunel Pension Partnership, the pension fund’s LGPS investment pooling
manager. 10% of the pension fund’s
assets are now invested in Brunel’s global sustainable equities fund, which is 20%
of total equities and the fund’s largest single investment. All other
actively managed Brunel funds are committed to a policy of a 7% year on year
reduction in their carbon footprint.
Brunel are widely recognised as a ‘market
leader’ within this field and their website includes a wealth of information
relating to its engagement activities with companies, including voting
records. In 2022 Brunel will complete a
‘stock take’ of their approach to engagement and divestment. If this review
concludes that companies are not taking appropriate action and sufficient steps
to manage climate risks and to enable alignment with the Paris Climate Agreement then the Committee will need to reconsider its
approach too.
Question 3:
Andrew Carey
In
Dorset Council’s ‘Making it happen action plan’, the Council’s Objective 1
includes the following action:
“Investigate
decarbonising Dorset Council pension scheme” with the stated
target: “Investigations carried out and reported to EAP
by March 2021”.
Have
those investigations been carried out and have they been reported to the EAP?
If so, what did the report say?
In an answer given by the Chairman of Dorset
Council’s Pension Fund Committee on 10th September 2020, Brunel Pension
Partnership were quoted as follows:
“On the issue of divestment, Brunel supports
divestment from specific fossil fuel and other carbon-intense companies if they
present a material investment risk – such as due to ‘stranded assets’ – but
this is based on analysis by our asset managers. Brunel expects managers to
take these decisions independently.
…We chose not to use exclusion lists with our active managers…. We will
not issue exclusion lists…”
This means that Brunel is divesting from
fossil fuel companies only when they present an investment risk - not when they present a risk to the planet.
Given that six other local government
pension funds, half of all UK Universities, and over 1,250 institutions
representing over $14.5 trillion in assets have already committed to going
fossil free, does the Committee recognise that its failure to instruct Brunel
on this policy is at odds with its Climate & Ecological Emergency Strategy,
which states, amongst other things, its intention to "Take DIRECT action
to reduce our own carbon footprint... showing leadership as a large
public sector organisation".
Answer 3
The Local Government Pension Scheme (LGPS)
is a national pension scheme administered locally. Dorset Council (DC) is the administering
authority for the LGPS in Dorset which provides pensions and other benefits for
employees of DC, other councils and a range of other
organisations within the county.
DC has
delegated its responsibilities as an administering authority to the Pension
Fund Committee, which consists of five DC elected members, three Bournemouth, Christchurch and Poole Council (BCP) elected members, and
one scheme member representative nominated by the trade unions.
The purpose of
the pension fund is to pay benefits to scheme members. The Pension Fund Committee has a duty to
scheme members and their employers to ensure that their contributions to the
pension fund are invested appropriately to make returns sufficient to meet
those obligations. This duty overrides any other considerations.
At its meeting September 2020, the Committee
agreed to seek to reduce investment in all high carbon emitting companies and
to influence the demand for fossil fuels and their financing, not just their
supply. This approach to decarbonisation
was based on evidence that such an approach will deliver significantly greater
reductions in the ‘carbon footprint’ of the pension fund’s investments that
blanket divestment, without negatively impacting returns. The reports, minutes and a recording of those
discussions are all available on the Council’s website.
Brunel
are widely recognised as a ‘market leader’ within this field and their website
includes a wealth of information relating to its engagement activities with
companies, including voting records. In
2022 Brunel will complete a ‘stock take’ of their approach to engagement and
divestment. If this review concludes that companies are not taking appropriate
action and sufficient steps to manage climate risks and to enable alignment
with the Paris Climate Agreement then the Committee
will need to reconsider its approach too.
Question 4:
Pam Rosling
I am a Dorset Council Pensioner, and I
recently read an article in the New Scientist (Environment June 1st 2021) which had a strong impact on me. As a result I am
asking Dorset Council : Will you please poll Pension Fund members to establish
what demand there is among us for an ethical investment option, rather than us
having to continue to invest in fossil fuels when we don't want to?
The Local Government Pension Scheme (LGPS)
is a national pension scheme administered locally. Dorset Council (DC) is the administering
authority for the LGPS in Dorset which provides pensions and other benefits for
employees of DC, other councils and a range of other
organisations within the county.
DC has
delegated its responsibilities as an administering authority to the Pension
Fund Committee, which consists of five DC elected members, three Bournemouth, Christchurch and Poole Council (BCP) elected members, and
one scheme member representative nominated by the trade unions.
The LGPS is a ‘defined benefit’ scheme which means
that benefits for scheme members are calculated based on factors such as age,
length of membership and salary, not investment performance as they would be in
a ‘defined contribution’ scheme.
Administering authorities are required to
maintain a pension fund for the payment of benefits to scheme members funded by
contributions from scheme members and their employers, and from returns on
contributions invested prior to benefits becoming payable.
Contribution levels for scheme members are
set nationally, and contribution levels for scheme employers are set locally by
actuaries engaged by administering authorities.
As scheme member rates cannot be changed locally and benefits are defined,
the risk of investment underperformance is effectively borne by scheme
employers.
For the reasons set out above scheme members
cannot have different investment options available to them as could be the case
with a defined contribution scheme where the risk of investment
underperformance is borne by the individual scheme member.
Question 5:
Belinda Bawden
As a Dorset Pension Scheme member, I'd like
to ask the following question of the Dorset Pension Fund Committee on 15th
June.
On
page 24 in the section entitled 'The fossil fuel age is ending—get out while
you can', the UK Divest report details the market uncertainty, oil price
collapse and rapid switch of investments into the renewables sector:
"Local
Government Pension Funds must treat these changes seriously, or risk
substantial exposure to the coming collapse of fossil fuel companies in this world wide technology shift.
Unless
action is taken soon, the £10 billion invested in fossil fuels by UK local
government pension schemes could drastically reduce in value once the ‘carbon
bubble’ bursts (see text box, p. 47).
The
Bank of England (BoE) has said that in the UK up to £16 trillion of assets
could be wiped out if the climate emergency is not addressed effectively
(Partington, 2019).
Mark
Carney, the former governor of the BoE has said, the longer the adjustment is
delayed in the real economy, ‘the greater the risk that there is a sharp
adjustment’ (Partington, 2019).
Local
Government Pensions can and should act now to reduce their exposure to this
risk, so they don’t lose their members even more money in the transition than
they already have."
https://www.divest.org.uk/wp-content/uploads/2021/03/UKDivest_Report.pdf
Given that Dorset Council is highlighted in
this report as having the third highest proportion of fossil fuel investment of
all the UK local government pension schemes in its pension fund, please could
you let me know as a very worried member of your pension scheme when you will
divest from fossil fuels and how your pension scheme members can ensure
this happens quickly?
Answer 5
The Local Government Pension Scheme (LGPS) is a
‘defined benefit’ scheme which means that benefits for scheme members are
calculated based on factors such as age, length of membership and salary, not
investment performance as they would be in a ‘defined contribution’ scheme.
The LGPS is a national pension scheme
administered locally. Dorset Council
(DC) is the administering authority for the LGPS in Dorset which provides
pensions and other benefits for employees of DC, other councils
and a range of other organisations within the county.
DC has
delegated its responsibilities as an administering authority to the Pension
Fund Committee, which consists of five DC elected members, three Bournemouth, Christchurch and Poole Council (BCP) elected members, and
one scheme member representative nominated by the trade unions.
At its meeting September 2020, the Committee
agreed to seek to reduce investment in all high carbon emitting companies and
to influence the demand for fossil fuels and their financing, not just their
supply. This approach to decarbonisation
was based on evidence that such an approach will deliver significantly greater
reductions in the ‘carbon footprint’ of the pension fund’s investments that
blanket divestment, without negatively impacting returns.
The reports, minutes and a recording of
those discussions are all available on the Council’s website.
Significant decarbonisation has been and
will continue to be achieved through the transition of assets to the management
of Brunel Pension Partnership, the pension fund’s LGPS investment pooling
manager. 10% of the pension fund’s
assets are now invested in Brunel’s global sustainable equities fund, which is
20% of our total equities and is the fund’s largest single investment.
All other actively managed Brunel funds are committed to a policy of a 7%
year on year reduction in their carbon footprint.
The pension
fund’s investment pooling manager and underlying investment managers are
required to take into consideration all matters that present a financially
material risk to returns, including the risks that you highlight.
Question 6:
Dr Sandra Reeve
I would like Council to explain to me in
greater depth the case for staying invested in fossil fuels and ‘engaging’?
which has been an argument used in the past by Brunel Pension
Partnership/Dorset Council.
According to the report by UK Divest: "The
argument for ‘engagement’ tends to be one made by asset owners who employ
investment managers who won’t or can’t accept that there is a technology-driven
transition occurring. This approach is like arguing: ‘We’re long-term
shareholders in Blockbuster, the video rental store. We don’t divest. We’ll
engage with them to adapt to the threat of low-cost live-streaming posed by
this new disruptor called Netflix.’
And as the ‘engagement’ proceeds over the years, this one company goes bust as
the world no longer uses videos, while others’ share prices run away with
themselves as the technology shift happens. So this
approach of ‘we’ll decarbonise when markets decide to decarbonise’ is clearly
not a risk management strategy. It is a ‘do nothing, and
hope a few meetings will help’ strategy.
It is vital to realise that this is, at heart, a technology shift."(UK Divest- report) https://www.divest.org.uk/wp-content/uploads/2021/03/UKDivest_Report.pdf
As representatives of Dorset Council, do you agree with this analysis? If not,
what kind of effective, transformative engagement with the fossil fuel industry
does Dorset Council perceive to be possible that persuades it to continue to
invest 5% of the total value of its pension fund into fossil fuels through
Brunel- please could you give me some actual examples?'
On May 26, a
Dutch court ruled that Shell needed to cut its greenhouse gas emissions by 45%
by 2030. This is a clear indication of what will happen across the board in the
very near future.
BH, BP and Shell account for 40% of total direct investments across all
local authority pension funds in the UK.
It is becoming clear that Investing in fossil
fuels is increasingly costly. It’s a financial risk—with UK Public Pensions
losing £2 billion on oil investments in the last 4 years. It’s also a political
risk—with the UK public more concerned about climate change than ever before. (https://www.moneysavingexpert.com/poll/2021/how-important-is-protecting-the-environment-to-you-/). On June 1 Cop 26
President Alok Sharma at the first NetZero Pensions Summit said: 'Putting
your money in fossil fuels creates the very real risk of stranded assets.'
In the light of these facts on what basis is Dorset Council still prepared to
risk its members funds and to continue to divest from
fossil fuels at such a slow pace - 7% a year,
which means that it will take 15 years to divest completely, so until at least 2036?
Answer 6
The Local Government Pension Scheme (LGPS) is a
‘defined benefit’ scheme which means that benefits for scheme members are
calculated based on factors such as age, length of membership and salary, not
investment performance as they would be in a ‘defined contribution’ scheme.
The LGPS is a national pension scheme
administered locally. Dorset Council
(DC) is the administering authority for the LGPS in Dorset which provides
pensions and other benefits for employees of DC, other councils
and a range of other organisations within the county.
DC has
delegated its responsibilities as an administering authority to the Pension
Fund Committee, which consists of five DC elected members, three Bournemouth, Christchurch and Poole Council (BCP) elected members, and
one scheme member representative nominated by the trade unions.
At its meeting September 2020, the Committee
agreed to seek to reduce investment in all high carbon emitting companies and
to influence the demand for fossil fuels and their financing, not just their
supply. This approach to decarbonisation
was based on evidence that such an approach will deliver significantly greater
reductions in the ‘carbon footprint’ of the pension fund’s investments that
blanket divestment, without negatively impacting returns.
The pension
fund’s investment pooling manager and underlying investment managers are
required to take into consideration all matters that present a material risk to
returns, including the risks that you highlight.
Significant decarbonisation has been and
will continue to be achieved through the transition of assets to the management
of Brunel Pension Partnership, the pension fund’s LGPS investment pooling
manager. 10% of the pension fund’s
assets are now invested in Brunel’s global sustainable equities fund, which is
20% of our total equities and is the fund’s largest single investment.
All other actively managed Brunel funds are committed to a policy of a 7%
year on year reduction in their carbon footprint.
Brunel are widely recognised as a ‘market
leader’ within this field and their website includes a wealth of information
relating to its engagement activities with companies, including voting
records. In 2022 Brunel will complete a
‘stock take’ of their approach to engagement and divestment. If this review
concludes that companies are not taking appropriate action and sufficient steps
to manage climate risks and to enable alignment with the Paris Climate Agreement then the Committee will need to reconsider its
approach too.
Question 7:
Helen Sumbler
Has the Dorset Council Pension Fund equity portfolio
been assessed for carbon intensity and if so, how does this assessment compare
to the weighted average carbon intensity of the MSCI All Country World
Index (ACWI) at the same date, e.g. 178.5 tCO2e/$m as of 30th April
2020. If the fund has not been assessed against an internationally
recognised benchmark such as this, are there any plans to do so.
Answer 7
The pension fund’s LGPS investment pooling
manager, Brunel Pension Partnership, produce quarterly performance reports for
the Pension Fund Committee, publicly available on the Council’s website. These reports include summaries of the carbon
intensity and extractive exposure of all the Brunel funds the pension fund has
holdings in compared to industry benchmarks.
Question 8:
Vicki Elcoate
1. Councillor
Canning told me earlier this year that the data in the UK Divest Report for
Friends of the Earth of February 2021 was out of date for Dorset Council (https://www.divest.org.uk/wp-content/uploads/2021/03/UKDivest_Report.pdf).
He
said that since those figures, which related to the 2019/2020 financial year,
Dorset Council had undertaken a major strategic review of its pension fund
investments. He promised an update after March 2021. The question is:
what is the current amount of investment in fossil fuels (I understand these
are indirect investments)? The figures provided by the Friends of the Earth
report are for the amount in £s of investments and the % that is of the overall
investments. It would be useful to have it in the same format to compare. So this is not a question about the carbon footprint or the
carbon intensity of the investments. The figure in the Friends of the Earth
report was £128 million in indirect investment in fossil fuels. This put Dorset
in the top 10 of local authority pension funds for fossil fuel investments.
2. Brunel has made a
'net-zero by 2050' commitment. There is a clear contradiction here between
Brunel’s date and Dorset Council’s own target of 2040. Surely this is a ‘direct
action’ and Dorset Council should instruct Brunel to invest in
order to meet their 2040 date?
Answer 8.1
As part of the government’s requirement for
Local Government Pension Scheme (LGPS) funds to pool investments the Dorset
County Pension Fund no longer holds direct investments in companies. Instead, the vast majority
of its equity investments are now in pooled investment vehicles managed
by the Brunel Pension Partnership, the LGPS investment pooling manager set up
and fully owned by the administering authorities of ten LGPS funds including
Dorset.
Brunel regularly publish details on their website
of the underlying holdings in all their pooled investment vehicles. When this information is published for the
quarter ending 31 March 2021, officers will calculate the pension fund’s
indirect exposure to fossil fuels and report back to the next meeting of the
Pension Fund Committee in September.
Answer 8.2
The Local Government Pension Scheme (LGPS)
is a national pension scheme administered locally. Dorset Council (DC) is the administering
authority for the LGPS in Dorset which provides pensions and other benefits for
employees of DC, other councils and a range of other
organisations within the county.
DC has
delegated its responsibilities as an administering authority to the Pension
Fund Committee, which consists of five DC elected members, three Bournemouth, Christchurch and Poole Council (BCP) elected members, and
one scheme member representative nominated by the trade unions.
At its meeting September 2020, the Committee
agreed to seek to reduce investment in all high carbon emitting companies and
to influence the demand for fossil fuels and their financing, not just their
supply. This approach to decarbonisation
was based on evidence that such an approach will deliver significantly greater
reductions in the ‘carbon footprint’ of the pension fund’s investments that
blanket divestment, without negatively impacting returns.
Significant decarbonisation has been and
will continue to be achieved through the transition of assets to the management
of Brunel Pension Partnership, the pension fund’s LGPS investment pooling
manager. 10% of the pension fund’s
assets are now invested in Brunel’s global sustainable equities fund, which is
20% of our total equities and is the fund’s largest single investment. All
other actively managed Brunel funds are committed to a policy of a 7% year on
year reduction in their carbon footprint.
Brunel are widely recognised as a ‘market
leader’ within this field and their website includes a wealth of information
relating to its engagement activities with companies, including voting
records. In 2022 Brunel will complete a
‘stock take’ of their approach to engagement and divestment. If this review
concludes that companies are not taking appropriate action and sufficient steps
to manage climate risks and to enable alignment with the Paris Climate Agreement then the Committee will need to reconsider its
approach too.
Question 9:
Alison Smith
It has come to my attention that Dorset
pension funds are investing in companies involved in the exploitation of fossil
fuels particularly but not exclusively in Shell, BP
and BHP. In light of Dorset’s statement to create a
better environment in relation to climate change I feel that to continue to
support these companies with the investment of pension funds is contrary to the
expressed intentions of the council.
I would ask you to please remove these
investments and place them with companies which have a greener
intentions.
Answer 9
The Local
Government Pension Scheme (LGPS) is a national pension scheme administered
locally. Dorset Council (DC) is the
administering authority for the LGPS in Dorset which provides pensions and
other benefits for employees of DC, other councils and
a range of other organisations within the county.
DC has delegated its
responsibilities as an administering authority to the Pension Fund Committee,
which consists of five DC elected members, three Bournemouth, Christchurch and Poole Council (BCP) elected members, and
one scheme member representative nominated by the trade unions.
At its meeting
September 2020, the Committee agreed to seek to reduce investment in all high
carbon emitting companies and to influence the demand for fossil fuels and
their financing, not just their supply.
This approach to decarbonisation was based on evidence that such an approach
will deliver significantly greater reductions in the ‘carbon footprint’ of the
pension fund’s investments that blanket divestment, without negatively
impacting returns.
Significant
decarbonisation has been and will continue to be achieved through the
transition of assets to the management of Brunel Pension Partnership, the
pension fund’s LGPS investment pooling manager.
10% of the pension fund’s assets are now invested in Brunel’s global
sustainable equities fund, which is 20% of our total equities and is the fund’s
largest single investment. All other actively managed Brunel funds are
committed to a policy of a 7% year on year reduction in their carbon footprint.
Brunel are widely
recognised as a ‘market leader’ within this field and their website includes a
wealth of information relating to its engagement activities with companies,
including voting records. In 2022 Brunel
will complete a ‘stock take’ of their approach to engagement and divestment. If
this review concludes that companies are not taking appropriate action and
sufficient steps to manage climate risks and to enable alignment with the Paris
Climate Agreement then the Committee will need to
reconsider its approach too.