County Council to consider impact of new climate laws on Pension Fund

Press release
Divest East Sussex [1]
23 May 2017

COUNTY COUNCIL TO CONSIDER IMPACT OF NEW CLIMATE LAWS ON PENSION FUND
East Sussex Pension Committee acknowledges duty to consider long-term risks, as 1,662 residents petition Council to stop investing local people’s pensions in oil, coal and gas industries.

23 May 2017, County Hall, Lewes: The East Sussex Pension Committee will consider whether or not it will be able to successfully anticipate any sudden sudden loss in the value of its investments in fossil fuels (oil, coal and gas) as a result of future climate change legislation, the chair of the Committee, Cllr Richard Stogdon declared this morning [2]. The declaration followed the latest hand-in of signatures of the petition to Divest the East Sussex Pension Fund from fossil fuels, which has now been signed by over 1,660 people from across the County [3].

Cllr Stogdon made the remarks in response to a question from a member of the public at this morning’s Full Council meeting of East Sussex County Council at County Hall.

The East Sussex Pension Fund – which is administered by the County Council and holds the pensions for a wide range of organisations from across East Sussex – is estimated to have £172m invested in the fossil fuels [4]. Three members of the Fund – Hastings Borough Council, Lewes Town Council and Brighton and Hove City Council – have already passed motions calling on the Fund to divest from fossil fuels [5]. In February the Pension Committee formally recognised that climate change ‘poses material [ie. significant financial] risks’ to the Pension Fund [6].

Cllr Stogdon also affirmed that the Committee accepted the authoritative conclusions of the Law Commission that Committee members are  not required  to  ‘maximise  [short-term] returns’, but instead ‘must weigh returns against  risks, including  long-term  risks’ – such as those posed by climate change – in order ‘to secure  the  best  realistic  return  over  the  long-term’ for the Fund [7].

Arnold Simanowitz, a spokesperon for Divest East Sussex, said: ‘Investments in fossil fuels are not only damaging the balance of the earth’s climate, but also pose a serious financial risk to investors. It is therefore the responsible and the prudent thing to do to divest the East Sussex Pension Fund from these dirty and risky fuels. We urge all East Sussex residents to support the call for fossil fuel divestment by visiting http://tinyurl.com/esccdivest and adding their names to the Divest East Sussex petition.’

Gabriel Carlyle from St Leonards-on-Sea, whose question prompted Cllr Stogdon’s response said: ‘According to the Financial Times, countries around the world have now adopted more than 1,200 climate change laws, up from about 60 two decades ago [8]. Given the growing consensus around climate change science, more and stricter legislation is surely on the way. The recent history of financial markets suggests that few investors will be able to successfully anticipate the sudden drops in the value of fossil fuel investments that may result. The East Sussex Pension Fund would be wise to follow the example of other Pension Funds – such as Southwark and Waltham Forest – and ditch its investments in these dirty fuels.’

ENDNOTES
[1] Divest East Sussex is a coalition of East Sussex organisations calling for the divestment of the East Sussex Pension Fund from Fossil Fuels. Members include Fossil Free Hastings (https://fossilfreehastings.wordpress.com), Climate Forest Row and Keep It In the Ground Lewes.
[2] See section 15 (‘Questions from members of the public’) on the webcast of the 23 May 2017 Full Council meeting: https://eastsussex.public-i.tv/core/portal/webcast_interactive/200456. Cllr Stogdon was asked: ‘Given the growing consensus around climate change science, it is rational for investors to expect much tigher carbon regulation – with profound economic effects. Does the Pension Committee accept that the recent history of financial markets suggests that few investors will be able to successfully anticipate any sudden re-pricing and / or stranding of fossil fuel assets that result?’ He replied: ‘The Committee hasn’t actually considered that particular point but will be doing so later this year.’
[3] See https://campaigns.gofossilfree.org/petitions/divest-east-sussex-pension-fund-from-fossil-fuels. Signatories to the petition include residents of Battle, Bexhill, Brighton, Crowborough, Eastbourne, Etchingham, Forest Row, Hastings, Heathfield, Hove, Lewes, Polegate, Seaford, St Leonards, Uckfield and Winchelsea.
[4] ‘REVEALED: UK Councils have £14 billion invested in fossil fuels’, Fossil Free UK, 24 September 2015, http://gofossilfree.org/uk/revealed-uk-councils-have-14-billion-invested-in-fossil-fuels/. Based on data collected through Freedom of Information Requests (FOIs) to administering authorities for the 2014/15 financial year it was estimated that, as at 31/03/2015 the East Sussex Pension Fund had £172m invested in fossil fuels. This figure included direct equity holdings in the top 200 fossil fuel companies as well as estimated fossil fuel investments in pooled equity funds. See https://docs.google.com/spreadsheets/d/19OSrcE1GsWqvA8T56v0RC0IwXcnDhFuWm3UnMjsWb8E/edit?usp=drivesdk
[5] ‘Campaigners’ joy as Hastings council agrees fossil fuel divestment’, 14 April 2016, Hastings Observer, http://www.hastingsobserver.co.uk/news/local/campaigners-joy-as-hastings-council-agrees-fossil-fuel-divestment-1-7328414. ‘Lewes Town Council calls for East Sussex Pension Fund to ditch its investments in oil, coal and gas’, 7 March 2017, https://fossilfreehastings.wordpress.com/2017/03/07/lewes-town-council-calls-for-east-sussex-pension-fund-to-ditch-its-investments-in-oil-coal-and-gas. ‘Brighton Council calls for East Sussex Pension Fund to ditch fossil fuels’, 6 April 2017, https://fossilfreehastings.wordpress.com/2017/04/06/brighton-council-calls-for-east-sussex-pension-fund-to-ditch-fossil-fuels.
[6] See item 53.2 of https://democracy.eastsussex.gov.uk/documents/g2522/Printed%20minutes%2027th-Feb-2017%2010.00%20Pension%20Committee.pdf?T=1
[7] See section 15 (‘Questions from members of the public’) on the webcast of the 23 May 2017 Full Council meeting: https://eastsussex.public-i.tv/core/portal/webcast_interactive/200456. Cllr Stogdon was asked if the Pension Committee was ‘aware of the authoritative conclusions of the Law Commission, in its 2014 report ‘Fiduciary Duties of Investment Intermediaries’, that ‘trustees  are  not
required  to  “maximise  [short-term] returns”’, but instead ‘must weigh returns  against  risks, including  long-term  risks’ in order ‘to secure  the  best  realistic  return  over  the  long-term,  given  the  need  to  control  for risks, and, further, that this is ‘a question of broad judgment rather than  mathematical  formulae.’ He replied: ‘The Committee does recognise the recommendations contained in that report.’
[8] ‘The Big Green Bang: how renewable energy became unstoppable’, Financial Times, 18 May 2017, https://www.ft.com/content/44ed7e90-3960-11e7-ac89-b01cc67cfeec

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