Divesting pension funds from fossil fuels could only ‘superficially improve’ council’s green credentials

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Bedford Borough Hall

Bedford Borough Council has been told that divesting pension funds reduces the pressure on companies to accelerate their transition to net zero.

In January, councillors 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 9 May) whether the council had taken this action.

Bedford Mayor, Dave Hodgson said: “We did write to both Borders to Coast and the Bedfordshire Pension Fund.

“We have received a response, and I’ll make sure that is copied to this committee and the council, and to Mr Cooper.

“They are extensive responses, so I’m not going to read them out because they go to five pages in total,” he said.

Copies of both letters were sent to the Local Democracy Reporting Service.

Bedfordshire Pension Fund chair, Doug McMurdo, wrote that the Pension Fund Committee takes its responsibilities in relation to climate change “extremely seriously” and  the committee considers climate risk as one of the most “significant risks” to the long term value of the fund.

In September 2020, the committee agreed to a set of Responsible Investment Beliefs.

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

He continued to say that the Fund does not believe that the exclusion of any one sector from an investment strategy is an “effective or appropriate” mechanism to manage risk.

Adding that divestment reduces the pressure on the sector to change its behaviours and expedite the transition to net zero, which makes it “harder to drive change”.

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

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

Chris Hitchen, chair of the board, 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” the green credentials of an individual portfolio, it doesn’t 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 companies it invests in.

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

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

Mayor said: “We will have to review what our next steps are when [councillors] have seen these responses.”

by John Guinn
Local Democracy Reporter

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