Minutes:
Mr
Gillott attended the meeting and addressed the Committee on behalf of the Staff
Climate Action Group.
“The
Staff Climate Action Group is an informal forum for OCC staff from any
directorate that meets on the last Tuesday of every month to hear updates on
the council’s climate agenda and find ways to work together to address the
climate crisis. Members of the group champion climate action within their
individual teams and welcome the opportunity to focus on supporting the Pension
Fund Committee to be as ambitious as possible in their endeavours to address
the climate emergency.
International
experts agree that burning fossil fuels created the climate emergency,
therefore there is considerable interest amongst the Staff Climate Action Group
in the investment decisions of the Pension Fund Committee (PFC). Thank you to
Sean Collins, the Pensions Service Manager, who accepted our invitation and
attended our March 2021 meeting to brief the group on the committee’s progress
in relation to climate risk.
We
would like to congratulate the PFC for its decision last year to opt for Paris
Aligned Benchmarks for 15% of the fund in passive equities, thereby effectively
excluding investments in fossil fuel companies. We note that this decision to
divest this part of the fund from fossil fuel (and tobacco) companies will have
no financial impact on the fund. We also applaud the PFC for achieving a 17%
reduction in emissions across its measurable investments, and fully support the
aim to decarbonise the whole fund.
The
decision over passive equities raises the question of the place of investments in
fossil fuel companies in the remaining 85% of the fund. In our communications
with Sean Collins, he has raised the problem of a lack of standard definition
of a fossil fuel company. He mentions that Brunel continues to work with
Governments and within the investment industry to develop standard definitions
which will improve the level of reporting going forward, including the use of
the criteria developed for the new Paris Aligned Benchmark to assess the
investments held by the LGPS’s active fund managers. Sean states that this
benchmark excludes a number of companies based on the revenue earned from the
exploration, extraction and processing of coal, oil and gas as well as a number
of energy companies based on the carbon intensity of their operations.
We
ask the PFC to provide a report for this group on progress with the development
of definitions of fossil fuel companies, the time frame/dates for the adoption
of the Paris Aligned Benchmark, and as the definition becomes clear, the funds’
holdings in fossil fuel companies. In the meantime, we welcome the development
of a listing of all investments on the pensions website and would like to
request that we are sent such a listing.
We
understand that there is also no standard definition of a climate positive
company. However, we are interested in any examples of investments in such
things as renewable technologies and sustainable housing particularly if this
is specifically made as part of the Fund’s present climate policy. Oxfordshire
Fair Deal Alliance has made the climate emergency its number one priority. From
recent national polls we know that there is widespread support for action. A
YouGov poll earlier this year found just 12% of the UK public were in favour of
fossil fuel investments from pension funds. Polling from NEST in 2020 found
that 65% of pension savers believed their pension should be invested in a way
that reduced the impact of climate change.
From
Sean’s presentation we understand that the PFC’s current position is that it is
better to engage with companies to encourage them to change rather than divest
from a whole investment sector (though the recent decision to divest its
passive funds from fossil fuels may suggest a shift in thinking). Scientists
say that 60% of current oil and gas reserves (and 90% of coal) must remain
underground to meet the IPCC’s 1.5 degree target, which means that fossil fuel
companies must change their business plans and stop exploring for and
developing new reserves. If the PFC’s position favours engagement in rather
than blanket divestment from fossil fuel companies for the remainder of the
fund, the Staff Climate Action Group would like to ask for a report on the
requirements being placed on fossil fuel companies to halt exploration for and
development of new reserves, the timeframes for compliance and the consequences
of non-compliance.
We
urge the PFC to continue along a path to address climate risk in all of its
investment decisions. When we asked Sean about the potential for bringing
forward the 2050 target for making the fund carbon neutral, and help us to
understand the barriers that would, for example prevent the fund being aligned
to the council’s more ambitious 2030 target (or failing that an interim target
such as 2040), he responded that ‘as a global investor with a wish to drive
real world change to deliver a sustainable future (rather than simply aiming to
de-carbonise our own investments without delivering real world change, and
therefore leaving the Fund exposed to the same long term risks around the
sustainability of the world as we currently recognise it) our timescales are
heavily influenced by international responses.’ We understand this position in
relation to target dates and applaud the aspiration of the Committee for
setting its sights on ‘real world change’ rather than simply on financial
returns. In light of the latest UN report announcing a ‘code red for humanity’,
we are keen for updates on how the Pension Fund Committee is progressing with
its agenda for achieving real world change and ask that the target date for a
carbon neutral fund be kept under review.
Sean
Collins has mentioned ways in which the Pension Fund Committee is striving to
be transparent and provide information, for example through the Pension Fund
web pages. As we have already found out in our email correspondence with Sean
this is a complex area with potentially huge risks and benefits, which is why
we value opportunities to hear directly from Sean to ask questions for clarity.
We would therefore like to ask him to attend our group to provide biannual
updates to provide a feedback loop between staff and the PFC.
In
summary, we would like to ask Sean Collins to attend a meeting in the near
future to provide us with;
• A report on progress with the
development of definitions of fossil fuel companies and climate positive
companies, and the time frame for the adoption of the Paris Aligned Benchmark
• A PFC report with a clear breakdown of
all holdings, with any which have been specifically invested in as “Climate
Solutions” highlighted
• A report on the requirements being
placed on fossil fuel companies to halt exploration for and development of new
reserves, the timeframes for compliance and the consequences of non-compliance.”