June 18, 2018 Read More →

U.K. pension funds given OK to divest potentially stranded fossil fuel investments

The Guardian:

Managers of the £1.5 trillion invested in Britain’s workplace pension schemes are to be given new powers to dump shares in oil, gas and coal companies in favor of long-term investment in green and “social impact” opportunities.

Government proposals published on Monday are designed to give pension fund trustees more confidence to divest from environmentally damaging fossil fuels and put their cash in green alternatives if it meets their members’ wishes. Until now many pension trustees have been hamstrung by fiduciary duties that they feel requires them to seek the best returns irrespective of the threat of climate change.

The new rules, though couched in opaque legalese, are a coded go-ahead for pension funds to sell shares in fossil fuel companies if they believe that they could turn into “stranded assets”. The term refers to companies’ coal, oil and gas deposits that may not ever be monetised as the world transitions to a low-carbon economy.

In the paper published on Monday, Clarifying and Strengthening Trustees’ Investment Duties, the Department for Work and Pensions (DWP) said: “Our proposed regulations are intended to reassure trustees that they can (and indeed should) take account of financially material risks, whether these stem from investee firms’ traditional financial reporting, or from broader risks covered in non-financial reporting or elsewhere.”

But the DWP warned that the new rules do not give carte blanche for activist groups to bully pension funds into selling out of fossil fuels. “These proposals are not intended to give any support to activist groups for boycotts or divestment from certain assets,” the DWP paper said. “Trustees have primacy in investment decisions and, whilst they should not necessarily rule out the ability to take account of members’ views, they are never obliged to, and the prime focus is to deliver a return to members.”

A growing number of UK and European insurance companies have started selling holdings in coal companies and refusing to insure their operations. More than £15 billion has been divested by insurers including Allianz, Aviva, Axa, Legal & General, Swiss Re and Zurich in the past two years, according to Unfriend Coal Network, a global coalition of NGOs and campaigners including 350.org and Greenpeace.

More: UK pension funds get green light to dump fossil fuel investments

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