Open Letter to Pensions Minster in Support of Fossil Fuel Divestment
More than 70 prominent civil society leaders – including MPs, Councillors, pension fund trustees, investment experts, NGO directors, faith leaders and artists – have signed an open letter rebutting the Pensions Minister Guy Opperman’s public support of continued fossil fuel investments.
We are concerned and disappointed that Pensions Minister Guy Opperman has publicly discouraged pension fund trustees from divesting from fossil fuel companies (7 July 2020). The Minister’s recommendation that investors “nudge” and “cajole” oil and gas companies towards climate-friendly business models disregards the scale of the escalating climate crisis and ignores the clear moral, scientific and financial arguments for divestment.
Mr Opperman’s anti-divestment stance also contradicts Government guidance (which lists divestment as one course of action for funds “seeking to demonstrate leadership”) and his own previous communication in which he praised the “shift away from fossil fuels” in pension fund portfolios.
The Government is making welcome progress in embedding climate risk disclosure in the financial reporting of pension funds. It is therefore puzzling that the Minister dismisses divestment – which is rooted in sound financial risk management. The UN special envoy for climate action and finance Mark Carney, the G20’s Financial Stability Board and the Environmental Audit Committee have publicly warned of the exposure of UK investors, including pension funds, to the risks of overvalued carbon assets which will be left ‘stranded’ as the world transitions to renewables. The particular vulnerability of the oil and gas sector during the COVID-19 pandemic has tarnished its brand as a safe investment and provides an important warning signal to investors.
Government efforts to establish the Paris Climate Agreement as a central reference for pension funds are warmly welcome. Yet Mr Opperman now undermines these by suggesting it is not necessary for pension funds to align investments with Paris at this point in time. With the devastating impacts of the climate emergency evident across the globe, we are left to wonder when the right moment might be.
The world’s remaining carbon budget for the 1.5 degree temperature target is shrinking rapidly. Based on the principle of equity as enshrined in the Paris Agreement, Global North countries must cut carbon emissions faster, not delay and defer the necessary transformation to prolong business as usual.
Fossil fuel companies are not working towards aligning their business models with the Paris Agreement, as the Minister implies. Despite clear evidence that we need to leave fossil fuels in the ground, companies such as Shell and Exxon are planning to significantly expand fossil fuel extraction by 2030. For every £1 invested by fossil fuel majors, over 95p ends up in further expansion of oil and gas reserves that are incompatible with a Net Zero trajectory.
Astute investors know there are far better companies to invest in that are already delivering a green recovery and clean energy transition. At least 10 local authority pension funds are redirecting their investments away from fossil fuels and into clean energy solutions. Following calls from over 360 cross-party MPs for divestment, the Parliamentary Pension Fund has also begun to reduce fossil fuel holdings and shift investments into infrastructure funds dedicated to new solar and wind energy.
Mr Opperman’s assertion that collaboration through investor engagement can turn fossil fuel majors into low-carbon companies is not borne out by evidence. Investor pressure has never reshaped any company’s core business and cannot transform an entire sector of powerful multinationals. Governments must use their powers as policy makers to force fossil fuel companies to become Paris-compliant or wind down.
Divestment makes this easier: as pension holders reduce their exposure to this declining industry, they enable governments to accelerate the transition away from fossil fuels without adverse effects on the wider public’s hard earned pension pots.
Divestment is a logical course of action for prudent trustees who wish to manage the risks and benefit from the opportunities of the transition to a greener economy. Its financial merits and strong ethical appeal have created a growing demand for fossil free pensions. We appeal to Mr Opperman not to discourage others from following the actions that thousands of forward-thinking institutions have already taken.
Councillor Alison Teal, Sheffield City Council
Councillor Anna Birley – Chair of the Pensions Committee, Lambeth Council
Anne Harris – Campaigner, Coal Action Network
Caroline Lucas – Green Party MP for Brighton Pavilion
Caroline Russell – Green Party Assembly Member, London City Hall
Caryl Churchill – Playwright
Celia McKeon – Chief Executive, Joseph Rowntree Charitable Trust
Dr Charlie Gardner – Lecturer in Conservation Science, Durrell Institute of Conservation and Ecology
Christine Allen – Director, CAFOD
Christian McAnea – Assistant General Secretary, UNISON
Claire James – Campaigns Coordinator, Campaign against Climate Change
Clive Lewis – Labour MP for Norwich South
Revd Dr Damian Howard SJ – Provincial, Jesuits in Britain
Revd Dr Darrell Hannah – Chair, Operation Noah
Rt Revd David Atkinson – Assistant Bishop in Diocese of Southwark
David Francis – Green Party Councillor, South Tyneside Council
Revd Dr David Pickering – Moderator of the United Reformed Church National Synod of Scotland
Councillor Dave Poyser – Chair of Islington Pensions Committee 2017-2019
Revd Dr David Gregory – Chair of John Ray Initiative and former President of the Baptist Union
Sir Ed Davey – Liberal Democrat MP for Kingston and Surbiton
Deborah Tomkins – Chair, Green Christian
Eilidh Robb – UK Youth Climate Coalition COP Coordinator
Fran Boait – Executive Director, Positive Money
Guy Woolf – Chair of Equity’s Young Members’ Committee
Helen Monks – Actor, Equity Young Members Committee Member & Co-Artistic Director of the theatre company LUNG
Hugh Knowles – Interim CEO, Friends of the Earth
Revd Dr Inderjit Bhogal, Former President of Methodist Conference
James Marriott – Founder, Platform
Kevin Warnes – Green Party Councillor for Shipley Ward, Bradford
Mayor Jamie Driscoll – Mayor of North of Tyne Combined Authority