Harringay, Haringey - So Good they Spelt it Twice!
Haringey's pension funds in fossil fuels - petition
Haringey was one of the first local councils to start moving its pension funds away from coal and oil - but it still has significant holdings in fossil fuels.
The Pensions Committee has agreed to reconsider this in March. We want to get 1,000 signatures before January - we now have 630 (mainly on paper). If you agree climate change is a major threat and we shouldn't be investing in climate destruction, please sign your local Friends of the Earth petition
https://actionnetwork.org/petitions/tell-haringey-finish-the-job-on...
Replies to This Discussion
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Permalink Reply by Michael Anderson on
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Thanks for raising this Quentin. It’s an issue for all local government pension funds. I’m a trade union representative on Camden Pensions Committee and we’re working with Divest Camden on the same issue
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Permalink Reply by Keats Pereira on
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Signed
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I'm a bit dubious about this. I feel strongly about the environment and I'm all in favour of appropriate steps to tackle climate change. But the primary duty of pension fund trustees must be to make sure that the pension fund can meet its liabilities, otherwise somebody will have to make up any shortfall (either the pensioners or the taxpayer).
So I think decisions not to invest in these companies have to be based on sound financial analysis, not just some vague notion of what's ethical. After all, people may have ethical objections to all sorts of companies - pharmaceuticals, defence, banks, companies that don't pay much tax, companies that have use/exploit cheap third world labour etc. In fact, it's a challenge to identify many big companies that don't cross somebody's ethical red lines. And while I'm no expert, I'd imagine that if you start making large swathes of the market off-limits then you are likely to increase the risks that the pension fund can't match the overall return of the market.
So, while I'm sure this is well-intentioned, and I'm open to persuasion, I'm not signing it. I'd be much more interested in what Haringey is doing to reduce its direct impact on the environment.
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Permalink Reply by John McMullan on
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Not only that but when we get a Labour government they will be nationalising anything remotely ethical.
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Public sector pension funds are legally required to invest in a way the ensures the best return for the fund beneficiaries. What organisations like Divest have show is that non-petrochemical investments are good investments. One of the problems is the fund managers (who are companies that manage fund investments in return for enormous fees) are incredibly conservative in their approach. Getting them to even consider a move out of petrochemicals has been years of hard slog on the committee I sit on. Outside pressure on Councillors (who chair committees) gets them to put pressure on fund managers to actually start looking at what else is available in the market.
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I'm sure you're right. But to be honest, I want somebody who is "incredibly conservative" in their approach to managing my pension. Billions of pounds are at stake, and there are massive problems if the pension fund can't meet its future liabilities.
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Permalink Reply by kotkas on
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A DB fund in deficit would require more than plain old conservatism. It needs active measures to fill whatever valuation gap they have which often requires focus on specialist investments that deliver above and beyond what your usual equities/bonds allocation would deliver.
I for one would argue that fossil fuel investments may be financially imprudent in the long term given the collapse in oil prices and where regulation is heading across the globe. All of course highly dependent on state of the fund, total exposure to that sector etc etc...
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Permalink Reply by JHauptman on
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A local council's committee of interested but inexperienced stakeholders driving investment decisions for the pension fund? Not for me, thanks.
As soon as you want an actively managed fund, you will be paying the kinds of fees which are proven to have a deleterious effect on capital. Any tracking or benchmarked fund will be significantly cheaper, but can not escape the need for investment in 'fossil-fuel' related companies. Shell and BP make up 17% of the FTSE 100.
Initiatives like this do little other than to provide councils with easy and meaningless PR wins. They help mask the lack of genuine change and ambition at local level.
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In countries that require opacity in fees and transaction costs, these costs have fallen. For example, in the Netherlands, in three years since fees and transaction costs were required to be published they have fallen by a third. The U.K. current does not have such legislation.
You will be familiar with the Financial Conduct Authority report from 2017 (Management Market Study - link below) which concludes that actively managed and passively managed funds did not outperform their own benchmarks after fees: These findings apply to both retail and institutional investors. There is some evidence of a negative relationship between net returns and charges, suggesting that when choosing between active funds investors paying higher prices for funds, on average, achieve worse performance.
Finally, if other investments are available that can perform as well as, or out perform fossil fuel investments, what is the issue? Not investing in fossil fuel doesn’t mean shifting to poorly performing investments. It can mean investing in technologies that are developing to replace fossil fuels or other opportunities outside of the sector. Those investments decisions will still be made on what has the best returns and the lowest levels of acceptable risk.
https://www.fca.org.uk/publication/market-studies/ms15-2-3.pdf
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The inefficiencies and unjustified fees of the UK fund management industry are obviously something we do not disagree on. The FCA report comes at the tail end of a couple of decades of research highlighting the pension 'theft' that we've all suffered.
The issue here, however, is the actual value or benefit of the type of campaign proposed in this post.
A quick look at the annual report for Haringey's pension shows that it has, just last FY, undertaken a shift into 'low carbon' and renewables.
20% of the total portfolio has now been allocated to a Global Low-Carbon Equity fund. This came from from divesting a Nth American Equity fund. Unsurprisingly, the Low-Carbon Global fund has an almost indistinguishable performance and make up to the 'normal' Global Equity fund.
Another 5% of the total portfolio has been allocated to 'Renewables infrastructure', though it's not clear if this has been invested yet.
This switch appears to have cost £500,000 in transaction fees. And management fees for the total fund have increased by 42% from the previous year. That represents an increase of £1.3m... or, a third of the fund's total dividends received in the previous year.
All this for no possible financial gain (they essentially swapped a global proxy for a global proxy). But I bet it played well over cocktails in Muswell Hill and City Hall.
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