Over 80% of the world's coal, oil and gas reserves are unburnable if we want to stop climate change. So we have started a campaign to persuade Nottinghamshire Pension Fund to drop its fossil fuel investments.
Our research shows that the Fund has over £200 million invested directly in fossil fuel companies including Shell, BP, BG and even in coal companies BHP Billiton and Glencore. There are also large holdings in Barclays and HSBC - which both have a record in funding dirty coal extraction. In addition, there could be a similar amount again invested indirectly through pooled equity funds. (For details see our letter to the Fund of 17/9/15.)
Notts Pension Fund invests around £4bn on behalf of over 100,000 members - employees of district councils as well as the county council plus education institutions and many voluntary organisations. The Fund is managed by Notts County Council. It does not have a policy on fossil fuels.
Nottingham Friends of the Earth wrote to the Fund in March 2015 pointing out that the Bank of England had warned that fossil fuel investments 'may take a huge hit' as the world takes action to limit climate emissions. In September we asked what action has been taken since.
The Fund's Senior Accountant Simon Cunnington replied that the Bank of England speech was a personal opinion and gave no advice to 'the Fund has taken no action as a result of the speech'.
An answer to our letter of 17 September was received on 25 September. It claimed that, for reasons given in legal opinion obtained by the Local Government Association, 'the Fund will not be committing to move all investment out of fossil fuels at this point in time'. We replied with additional legal and financial advice which makes clear that Pension Funds can move investment out of fossil fuels.
Mr Cunnington also replied to a separate question about the Fund's largest single holding which is in Shell.
Notts Pension Fund losing millions on fossil fuel investments
During the year from 31/3/14 to 31/3/15 Shell's share price fell by around 10%, similar to fossil fuel stocks generally. But the Fund actually increased its holding of Shell shares substantially over the year. Mr Cunnington has now told us that the Fund has kept these shares in Shell - which had lost a further 20% in value by 18/9/15. We estimate that, on these shares alone, the Fund has lost over £15 million in value in the last six months - since the Fund failed to heed the Bank of England's warning.
Mr Cunington said "A key aim of the Fund is to provide investment returns to mitigate the cost to employers of providing pensions. Investments are therefore made with a view to medium to long term returns and clearly a period of price weakness presents a potential opportunity to generate higher returns. Investment income is also increasingly important and lower share prices can give an opportunity to achieve a higher yield from dividends."
Clearly Mr Cunnington doesn't understand that fossil fuel reserves are going to have to be left in the ground. Companies will have to write down the value of these assets. 'Price weakness' represents a loss of value, not an 'opportunity to generate higher returns'. Some people would see lower share prices as reflecting a market expectation of a lower yield from dividends.
Pension Funds should be investing in a better future for their members, not in the dirty industries of the past. They should be investing in community renewable energy schemes, zero carbon homes, etc, etc.
Notts Pension Fund has its Annual Meeting on 6 October when members of the Fund will be able to ask questions.