Greater Manchester climate campaigners not convinced by Pension Fund’s arguments

Steady State Manchester is part of the coalition that came together as Fossil Free Greater Manchester (FFGM) to campaign for the largest local authority pension fund to divest from fossil fuels.  It is consistent with our thinking on the regional economy that this £1.3 Billion, now invested in many dubious entities globally, is redirected to where it is needed, to our local economy and to sectors that rather than damaging the environment and climate, positively contribute to its restoration and protection.  As part of the campaign’s efforts to influence Greater Manchester Pension Fund we have been in correspondence with the chair, councillor Kieran Quinn, who is also leader of Tameside council.  The Fund’s answers do not convince us.

Fossil Free logoPRESS RELEASE from Fossil Free Greater Manchester

Thursday, 14 July

Greater Manchester climate campaigners not convinced by Pension Fund’s arguments.

Fossil Free Greater Manchester is not persuaded by Greater Manchester Pension Fund that its strategy for a low carbon economy can work. And we continue to draw attention to the risks to pensions of continuing to hold fossil fuel investments.

We wrote an open letter in May to councillor Kieran Quinn chair of Greater Manchester Pension Fund. We received a reply (Cllr Quinn response 6th June) and have published our response (below & also available here http://bit.ly/29D4upQ).

We asked cllr Quinn how much money the fund has lost on its coal stocks. He says that there is no loss until the stocks are sold. This is true, but a Micawber strategy of “waiting for mining shares to recover” risks a greater eventual loss while continuing to fund climate damaging coal extraction.

The Fund has not yet agreed to divest its fossil fuel stocks, preferring to engage with companies. We asked what the specific aims of engagement are and what evidence there is for its success. We have not received a direct answer and conclude that the aims are vague and the results unimpressive with respect to the major threat of global climate change.

Mark Burton from Fossil Free Greater Manchester said

While we believe the Fund does want to help reduce the threat of serious climate change, we have seen no evidence that its strategy is anywhere near effective. We call on the Fund to launch a responsibly managed divestment process in keeping with its duties to Fund members and the wider population of Greater Manchester”.

ends

/contd – notes

Notes for Editors

1) Fossil Free Greater Manchester is a coalition of organisations and individuals campaigning for the Greater Manchester Pension Fund (GMPF) to take its money out of fossil fuels.  This is part of an international campaign for divestment, thereby building up pressure on governments and business to leave the vast majority of fossil fuels in the ground – our diminishing chance of averting runaway climate chance.

2) Greater Manchester Pension Fund manages the pooled pension fund of the councils in Greater Manchester and those of some other organisations. It has some £13Bn in assets, of which approximately 10% are invested in fossil fuel stocks, either directly or indirectly via institutions such as banks and insurance companies. It is the largest such fund in the country and has one of the highest proportions of assets in fossil fuel stocks.

3) The text of the full letter follows:

4) For our previous open letter see http://bit.ly/29I4nfH

Fossil Free Greater Manchester

c/o Manchester Friends of the Earth
Green Fish Resource Centre
46-50 Oldham Street
Manchester
M4 1LE

Wednesday 6 July, 2016

Councillor Kieran Quinn,
Chair, Greater Manchester Pension Fund,
Guardsman Tony Downes House
5 Manchester Road
Droylsden
M43 6SF

Dear Councillor Quinn,

Your letter of 6 June in response to our open letter.

Thank you for taking the time to write a detailed response to our open letter, which as you have separately acknowledged is consistent with your aspirations for transparency.

We are pleased to see you have taken our concerns seriously and that GMPF aspires to act constructively to mitigate the serious threat of climate change. However, we are not persuaded that the strategy you have adopted towards the fossil fuel companies is adequate to meet this ambition.

Our position

Fossil Free Greater Manchester believes that a responsibly managed divestment from fossil fuel shares is not only key in facilitating a rapid transition to a low carbon economy but also necessary to prevent exposure to large losses for the fund in the long term. We are supported by the 5,000 people who have so far added their names to our petition and shown support for the campaign, showing their concerns about the amount of money GMPF has invested in fossil fuels. Meanwhile, 87 per cent of the 177 local candidates in Greater Manchester, cross party, who responded to the Manchester Friends of the Earth election survey last month also said the Fund should divest from fossil fuels, like 68 other Pension Funds worldwide.

Our concerns regarding GMPF’s strategy

Firstly, we would like to recognise the positive steps GMPF has taken which demonstrate commitment to your ambition. Namely recent investments in wind power, utilising the carbon tracker as well as engagement tactics. However, although these actions demonstrate a desire to achieve positive results we are sceptical about the effectiveness of your strategy. Our concerns were not mitigated when you did not directly answer two of the three questions we asked you; the specific goals of your engagement strategy and what objective results you have achieved through this method.

We do acknowledge that engagement with companies is an essential part of the tool-kit of responsible investors. But a tool-kit needs more than one tool. The evidence is that the fossil fuel companies have shown no moves away from strategies of further exploration and extraction of fossil hydrocarbons. There is no prospect of them becoming integrated energy companies. We note that GMPF apparently divested 95% of its Exxon holdings between 2014 and 2015. This is consistent with the Fund’s ethical duty in the face of this particular company’s failure to respond even to anodyne shareholder resolutions. As advised, we have studied the engagement reports from LAPFF and can find neither objectives nor outcomes commensurate with the scale of change that is necessary in these companies’ practices. The content of the “Aiming for A” resolutions to the three big mining companies, for instance, goes no further than “…reducing operational carbon emissions, maintaining a portfolio of assets resilient to future energy scenarios, and supporting low-carbon energy research and development” but nothing directly related to the enormous emissions from the continued exploitation of fossil fuels.

Whilst we acknowledge that GMPF will not make losses on coal until stocks are sold, it is important to recognise that their valuation has radically decreased and by holding onto these stocks GMPF runs the risk that these volatile stocks do not recover in the long term. We note the good performance of GMPF in the past, but can’t see evidence that would attribute this to the Fund’s high exposure to fossil fuels. The world is changing for good, so strategies that worked in the past when fossil fuels stocks were deemed to be “defensive” investments may not work in the future and perhaps this is already recognised in the management panel’s continued challenge to your contracted fund managers.

Conclusion

Our proposal remains that in keeping with its duty to beneficiaries, members and the wider population, GMPF,

  • Immediately freezes any new investments in fossil fuel companies;

  • Divests from any company which is involved in the exploration or production of coal and unconventional oil or gas within two years, and from all fossil fuel companies within five years;

  • Works with the Greater Manchester Combined Authority to develop and fund a low-carbon investment programme for Greater Manchester.

We would still appreciate a direct answer to our two questions on engagement:

Could you set out the specific goals of your engagement strategy?”

and

Could you say what the successes of your engagement strategy have been so far? Is it possible to quantify them in terms of saved emissions or investments in alternative energy?”

You might also consider a further question on engagement:

What criteria do you use to decide that engagement has not been successful and that exit from those stocks has become appropriate?”

Thank you for your attention.

Yours sincerely,

Chris Smith, Tamara Williams Barnes, Mark Burton, Ali Abbas

for Fossil Free Greater Manchester

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