As the profile of stranded assets, climate risk and the fossil fuel divestment movement started to build and gain traction, a group of MPs set out to question the Parliamentary Contributions Pension Fund (PCPF) on the fossil fuel investments of their own pension and management of climate risk.
In October 2014, Caroline Lucas MP and 15 other MPs and Peers wrote to Brian Donohoe, Chair of the Board of Trustees of the PCPF, asking how the fund was assessing and mitigating carbon risk in the fund.
The concerns were initially addressed as purely ethical issues, and Trustees claimed it would be impossible to conclude that scheme members would ‘share a moral viewpoint in one area of investment’. And that following their logical conclusion we’d end up living in a cave.
The MPs wrote back, objecting to the characterisation of climate change as a “moral” or non-financial factor and restating their request for information.
After further correspondence, an Early Day Motion on climate change risk, fossil fuel divestment and PCPF signed by 32 MPs covered in the Financial Times and a meeting between MPs and the Head of the Pensions and Payroll Directorate, the Trustees updated their position.
The recognised that climate change ‘may’ be a financial risk, and developed a Statement of Investment Principles which recognises that environmental, social and governance issues can have a material impact on the long term performance of the fund.
The MPs welcomed this progress, and followed up with specific questions about how these ESG risks were being managed, further details on the engagement approach with fossil fuel companies and any proactive measures being taken to address this risk. They suggested signing the Montreal Pledge on carbon disclosure and updating the investment principles to mirror that of the Environment Agency Pension Fund (EAPF) – a leader in the field – and recommended a meeting where Shareaction, EAPF, Carbon Tracker & others could present their work.
This issue was discussed at the 10 March 2016 Trustee meeting, but after several more rounds of correspondence, the MPs did not feel their questions had been sufficiently answered. In early November, the MPs received a letter stating it was no longer “possible for the trustees to engage in further prolonged discussion” with the MPs on the scheme’s investment approach, and putting an end to the conversation.
Caroline Lucas, MP responded to the letter with dismay:
“The attitude of the pension fund trustees is extremely short-sighted. Not only have they refused to properly engage with their members over simple transparency questions, but they are now dismissing our calls for action to protect investments from the financial risks associated with climate change. Parliamentarians should be leading the way on tackling climate change, yet our pension fund is letting us down and setting a terrible example to others about the right way to engage with members.”
To this day, MPs still don’t know where their pension is invested, how much is in fossil fuels and what concrete steps are being taken to manage the financial risks related to climate change. As the world commits to concerted action on climate change, and the warnings of the financial risks of climate change become louder and more frequent and hundreds of organisations around the world have already committed to divest from fossil fuels, this is an unacceptable response.
The ‘Divest Parliament’ campaign has been launched in response to this situation. It asks MPs to show leadership on climate action and responsible investment and demand further action from the MPs pension fund.
It comes within a week of the landmark ruling from two leading UK barristers, including pensions expert Keith Bryant QC, that pension fund trustees who fail to consider climate risk could be exposing themselves to legal challenge, and an EU directive requiring climate risk be taken into account in investment decisions that ‘paves the way for the introduction of fossil divestment by European pension funds”.
‘Divest Parliament’ is about building support for divestment across MPs, and showing the Pension Fund that its members do care about climate change and where their money is being invested.
By divesting their pension fund, MPs have an opportunity to show leadership on climate action and align their pensions with our national and international climate commitments. It’s an opportunity to reaffirm cross-party support for climate action, and allow the MPs Pension Fund to set a positive example on managing climate risk and responsible investment for all of our pensions.