The committee overseeing Shropshire County Pension Fund voted not to immediately pursue a programme of divestment, as called for by Shropshire and Telford & Wrekin councils, at a meeting on Monday.
Members instead said they would heed the advice of the fund’s investment managers and consultants, who had instead recommended to work towards getting its portfolio to net zero carbon by 2050.
However, the committee said it would not rule out divestment as part of the wider net zero strategy, but would leave it to fund managers to weigh up the companies’ carbon reduction progress with the financial interests of fund members.
The decision not to immediately divest was met with “shock and anger” from campaign group Fossil Free Shropshire, which staged an ‘oil pour’ protest as members arrived at the meeting.
Jo Blackman from the group addressed the committee at the start of the meeting and handed out more than 1,000 postcards signed by residents of the county in support of divestment.
Ms Blackman said: “You have an opportunity today to cease involvement with fossil fuels and, in the words of UN climate chief Patricia Espinosa, to stop investing in our own extinction.
“I urge the committee to align itself with the tide of public opinion and the wishes of employers, fulfil its fiduciary duties and be on the right side of history.”
The committee, which brings together members of both councils as well as non-voting employee and pensioner representatives, then received the fund’s second annual climate risk report.
The report, from asset management firm LGPS Central, detailed climate-related financial risks and opportunities the fund could face.
It said the fund’s carbon footprint had decreased by 9.9 per cent in the last year.
Laura Michie of LGPS Central told members: “The fund has clearly made significant enhancements to its asset management and oversight since the first climate risk report.”
Shropshire councillor Roger Evans voiced concern that some of the companies the fund is invested in “do not seem very committed” to carbon reduction.
LGPS representatives agreed there was “ambiguity” with lots of talk of “ambition” but not “commitment”.
Councillor Carolyn Healy, Telford & Wrekin’s cabinet member for climate change, said: “You have said ambition isn’t the same as commitment, and I would say commitment isn’t the same as action.”
She asked whether, and how, the fund measures the carbon reduction progress of companies with which it invests.
Councillor Healy added: “At what point, if we’re not satisfied these companies are moving quickly enough into that action, do we say ‘this isn’t the right place for our funds’?”
Shropshire councillor Brian Williams however said he was satisfied with the fund’s progress.
He said: “For some people we’re not moving fast enough. For others, in terms of our financial strategy as distinct from our climate strategy, we might be moving too fast.
“But in overall terms and in accordance with our overall financial responsibility to our pensioners, when we are looking at this report it seems to me that we have got our strategy right, that we are moving in the right direction at as reasonable a pace as is possible to ensure that the scheme’s financial management is satisfactory.”
Presentations were also given by LGPS, investment consultants Aon, Legal & General, which runs a big proportion of the fund’s equities, and BMO Global Asset Management, which engages with companies the fund invests in on its behalf.
They all expressed support for pursuing net zero by 2050, rather than immediate divestment, saying continued engagement with the companies concerned would better serve carbon-reduction goals.
James Walton, executive director of resources at Shropshire Council, told members they had to weigh up whether there was “strong evidence” that divestment “actively delivers” on climate change ambitions and/or ensuring the fund is fully funded – or whether it would “actively work against both these priorities”.
Mr Walton said the committee also needed to consider whether “a decision to divest unreasonably transfer[s] investment risk decision-making directly to pension committee members” and whether other options – namely engagement – could better fulfil these priorities.
Councillor Healy said the two did not have to be mutually exclusive, adding that divestment would be crucial in achieving the desired net zero outcome.
However, Patrick O’Hara, director of responsible investment at LGPS, responded: “It’s not strictly speaking true to say you can’t achieve net zero in an investment portfolio and invest in fossil fuels.”
Justin Bridges, Shropshire Council’s head of treasury and pensions, said “significant progress” had been made since both Shropshire and Telford & Wrekin councils voted to divest in 2020, highlighting the fact that 36 per cent of the fund’s investments are now in clean technologies.
In his report to the committee, Mr Bridges made seven recommendations including the commitment to net zero by 2050, which he said went “above and beyond” divestment.
However, the recommendations also included the assertion that members “do not agree that divestment from fossil fuels is in the best interests” of the fund’s members – something Councillor Williams said he could support.
He asked for this to be amended to instead pledge that divestment would not be ruled out.
Councillor Williams said: “There should be a statement that we are agreed to accept divestment but don’t want to divest everything tomorrow. We want them to do it to a timescale that accords with our overall financial objectives.”
Shropshire councillor Tom Biggins, committee chairman, said it was important not to “over-commit” to divestment.
He said: “We are going to rely on companies like Shell and BP to successfully transition over the next decade or so to actually achieve real decarbonisation in the world.
“What I don’t want to do is end up with a motion that stops us helping them on the journey that will actually benefit us all at the end of the day.”
Councillor Williams responded: “I am trying to avoid the perception that we are totally against divestment.
“Most of us agree that divestment is a good thing or a beneficial thing as we move towards 2050, so long as we don’t damage the financial objectives of the scheme to ensure that the fund is 100 per cent funded for our members.”
The amendment was unanimously backed by the committee.
The recommendations were then passed with four votes in favour and two against.
Following the meeting, Fossil Free Shropshire spokesman Jamie Russell said: “We have been left in a state of shock and anger by this vote.
“The pension committee has ignored all the evidence that divesting from fossil fuels would be financially better for the fund’s profits and would help Shropshire meet its 2030 net zero pledge.
“This vote makes it painfully clear that Shropshire is not the climate leader it claims to be.”
Mr Russell said the fund could not “financially or morally” continue investing in companies whose activities are “incompatible” with Paris Agreement goal of keeping the rise in global temperatures below 1.5C.
He added: “We do not believe that the pension fund’s 50,000 members want their savings invested in companies that are financially volatile and wrecking the planet for their children and grandchildren.
“The fact that the fund didn’t consult them properly before taking this vote is an insult.
“We will continue to fight for the Shropshire County Pension Fund to pursue the bigger profits and brighter future offered by renewables.”