Pensions Minister advises: 'cajole' fossil fuel giants
More than 70 civil society leaders, including MPs, have heavily criticised Pensions Minister Guy Opperman MP, for writing in the Telegraph that UK pension funds should not divest from fossil fuels
The civil society leaders and faith representatives who signed an Open Letter to criticise his anti-divestment stance included Quakers in Britain, who in 2013 became the first church in Britain to divest their centrally held funds from fossil fuel extraction.
In a blogpost, first published by the Telegraph, the minister publicly called on pension trustees to keep hold of fossil fuel assets in order to “nudge, cajole or vote" polluting companies towards sustainable business practises.
Meanwhile, the Open Letter says there is clear evidence that fossil fuels must be left in the ground and that investor pressure has never reshaped any company's core business and cannot transform an entire sector of powerful multinationals.
The full text of the letter:
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.
We need to leave fossil fuels in the ground- Letter to Pensions Minister
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.
Divestment is a logical course of action for prudent trustees.- Letter to Pensions Minister
"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.
"Yours sincerely."The letter was signed by Paul Parker for Quakers in Britain