Local Government Pension Scheme (LGPS) funds have denied they are doing too little to respond to the financial risks of climate change, following campaigner criticism.
Research by Friends of the Earth and Platform London into 19 UK funds judged most of their climate changes policies inadequate.
According to their report, eight funds were doing little or nothing to respond to the financial risks of climate change, five acknowledged the risks but were not doing enough, and two had strategies focused on shareholder engagement but without “meaningful” goals. Only four were praised for their “stronger” strategies.
Richard McIndoe, director of Strathclyde Pension Fund, which was among those alleged to be acknowledging the risk without reacting, said: “We have made a clear commitment to measuring and managing climate change risks to the fund – albeit our approach may not correspond with Friends of the Earth’s template.”
He cited a House of Commons environmental audit committee report from May which judged Strathclyde to be among the ‘more engaged’ LGPS funds on climate change, meaning they had “clearly identified climate change as a long-term risk (and opportunity), often some years ago, and were actively managing it”.
Ralph Sangster (Con), chair of the pensions committee at Hertfordshire CC, which was alleged by the report to be taking no action, said: “The fund works closely with its external investment consultant to assess the potential risk to its investments that could result from environmental, social and governance (ESG) factors, which would include the risks posed by climate change.
“The Hertfordshire fund does not dismiss the investment implications of climate change and carbon emission management.”
Although the fund can divest from companies for environmental reasons, Cllr Sangster emphasised that it “has a fiduciary responsibility to ensure that it invests member and employer contributions to deliver future and current benefits to its members through holding a diverse investment portfolio”.
Other LGPS funds contacted for comment have yet to respond.
According to the report, the eight funds taking no action included those for Hampshire, Essex, Kent, Hertfordshire, Tyne and Wear, Nottinghamshire, the East Riding of Yorkshire and Rhondda Cynon Taf.
The five funds said to be acknowledging climate risks but are not acting to address them adequately, included Lothian, Strathclyde, and those for West Midlands, West Yorkshire and Northern Ireland.
Greater Manchester and South Yorkshire’s pension funds were said to be developing strategies to tackle climate change risks, but their actions reported to be too heavily focused on shareholder engagement without meaningful goals, deadlines or consequences.
Merseyside, Lancashire, London and Avon’s pension funds are reportedly developing stronger climate change strategies that include tilting or divesting away from fossil fuel companies, and have engagement activities with clearer goals and timelines.
Deirdre Duff, divestment campaigner at Friends of the Earth, said: “Although many local government pension funds recognise the financial risk posed by climate change, they are failing to take sufficient action to address it.
“Fossil fuel investments are morally indefensible and also pose a serious financial risk to investors. Pension funds should not be putting pensioners’ money at risk by investing in soon-to-be devalued gas, oil and coal companies.”
The assets under management of the funds assessed were £148bn, roughly half of the value of the entire LGPS.