Agenda item

Motion submitted by Councillor Lawrence.

Motion on Notice regarding Leicestershire Pension Fund Fossil Fuel Investments was submitted by Councillor Lawrence (item 9.1 on the agenda filed with these minutes).

In proposing the motion, Councillor Lawrence highlighted that the motion had been amended slightly, following advice from the Monitoring Officer. He confirmed that the amended version of the motion required the funds officers at Leicestershire County Council to calculate and publish the carbon footprint of the investments made in fossil fuels as part of the pensions fund. A copy of the amended Motion on Notice was circulated at the meeting for Councillors to read.

He went on to state that in 2022-23, the Council had made more than £1.7m employer pension contributions to the Leicestershire pensions fund. He recognised that the Council was committed to reducing the carbon footprint of internal operations and that by 2023, the Council hoped to be net zero on carbon emissions.

Councillor Lawrence stated that in March 2021, the pension fund’s investments in companies associated with fossil fuels was estimated to be more than £154m and said that he believed as the Council’s pension contributions towards the fund were significant, these fossil fuel investments should be included in the Council’s carbon footprint calculations.

In order for the world to meet the UN Paris Agreement commitments to limit the global temperature increase to under 2 degrees, scientists believe that the switch from fossil fuels to renewable energy should be accelerated. He stated that some energy companies were opening up new fossil fuel reserves.

Councillor Lawrence stated that there was a significant financial risk to the future sustainability of pension funds. He said that some leading financial investment managers were advising divestment from fossil fuel companies, and investments in renewable energy. Councillor Lawrence said that this would ensure the Leicestershire Pensions Fund met its duty to earn sufficient returns on their investments to ensure pension benefits could be paid. 

He concluded by stating that without divestment from fossil fuels, the investments of the pension fund associated with fossil fuels could become worthless, resulting in a shortfall of investment returns, and this may require the Council to increase its employer contributions. He said he believed the pension fund’s continued investment in fossil fuels had an environmental impact which contributes to the carbon footprint of the Council and could prevent the Council in achieving its aim of becoming net zero by 2030. He asked for the Leicestershire pension fund to publicly commit to divest from fossil fuel companies by 2027.

Councillor Baines stated that the Council was concerned about the carbon footprint of the Council and as a result, produced the carbon neutral 2030 plan. The plan was focussed on reducing emissions of the Council’s buildings and transport and adopting carbon positive activities, such as planting trees and investing in renewable energy. All of the actions in the plan were within the Council’s direct control. He highlighted that the Leicestershire pensions fund was independent of the Council and had its own expert investment managers making decisions about where money is best invested to provide customers with the best possible return.

Councillor Baines stated that 3.7% of the total fund was invested in fossil fuel companies and that this number had been reduced significantly over time. He also highlighted that the companies associated with fossil fuels were diversifying away from fossil fuels.

He said he recognised that residents were interested in the Council’s plan to mitigate climate change and that a full assessment of the Council’s activities was necessary and that an acceleration of the Council’s actions to mitigate climate change was needed.

Councillor Westley said that he was concerned by the motion. He highlighted that a similar motion was proposed and rejected less than a year ago and that less than six months ago, trustees of the fund consulted with pension scheme members and put in place a climate strategy, addressing many of the issues raised. He said repeating the motion showed disregard to the Council and the members of the pension fund.

Councillor Westley went on to say that there was no evidence that divestment was successful. He said that the shares divested would be bought by others who may not be concerned with climate change. He said that divesting meant a loss in influence and suggested that a better alternative to the motion was to trust investment managers to engage with companies and ask them to behave more responsibly.

He also stated that whilst the investments in fossil fuels may become worthless over time, they may not. He said that investment returns in companies associated with fossil fuels had increased in recent years. He went on to say that it was not possible to consistently choose successful investments, and that successful investment was about diversifying. He said the fund was diversified enough to accept risks and investment warnings. He finished by saying that the Council should allow the investment managers to do their job.

Councillor Snartt stated that the fund’s recognition of climate risks started a long time ago and that investment in green infrastructure had started several years ago. There had been a sizable investment in the Local Government Pensions Scheme Central Climate Balance Fund in December 2020. This initiative aimed to give more exposure to companies with green revenues and to reduce exposure to companies with higher carbon emissions. This investment amounted to £750m and employed investment managers that aligned to their strong social and environmental policies. Councillor Snartt stated that this clearly indicated that the fund recognised that climate change was a risk and that he was pleased to see that steps had already been taken to move away from companies with carbon emissions and fossil fuel reserves.

Councillor Snartt said he would rather debate about what the Council was doing to lower carbon emissions themselves for the benefit of residents, as the Council did have control over this.

Councillor Snartt finished by stating that the fund officers had ascertained that the value of the total amount of investment made in fossil fuel companies had been overstated in the motion and invited the mover of the motion to comment on this.

Councillor Haynes stated that he avoided investments that did not align with his morals, and that he believed that the Leicestershire pensions fund should take the same approach. Councillor Haynes referred to the fires across the northern hemisphere over the summer and stated that this was due to climate change and the use of fossil fuels. The Leicestershire pension scheme consulted members on the draft climate strategy in July 2022, and many members had indicated that they favoured divestment from fossil fuel companies.

Councillor Haynes finished by saying that pensions were about preparing for the future financially but that climate change would have a devastating impact on the economy in the future. He said that the fossil fuel industry was dying and that investing in a declining industry was not prudent. He said that the future was in renewable energy.

Councillor Anne Gray said that she agreed that the Council needed to work hard to become carbon neutral by 2030. She said that the Council was simply asking the pensions fund to divest. She recognised that there was a risk that shares in fossil fuel companies may become worthless in the future and that divestment from fossil fuel companies doesn’t always work. Councillor Gray finished by highlighting that this was a moral issue as well as a financial issue, and that some funds divested shares in Russian companies following the outbreak of the war in Ukraine.

Councillor Miah advised that a similar motion was rejected last year and that it was before the May 2023 elections. He said that the direction of travel is away from fossil fuels and that younger generations are concerned about the environment. He felt that the motion was a form of reassurance that the Council was asking for changes to be made. He highlighted that there was a lot of money invested in fossil fuels as part of the pension scheme (£151m) and that the money could be spent on renewable energy. 

Councillor Matthews stated that he felt it was not appropriate for the Council to dictate what the pension fund was invested in.

In seconding the motion, Councillor Jones stated that the issues raised regarding climate change affected the entire planet. She said she felt that divestment was a small act that would send a significant message that public money should not be used to support industries that harm the environment. She said that she hoped that this act would inspire others to do the same.

She reiterated the point that investors divested from Russian companies last year, and those that did not were left with stranded assets. There was evidence to suggest that the pension fund performance would not be negatively affected by divestment, and that it would be more resilient in the long term.

She said that she believed the issue was serious and was above party politics and that there was more work planned that would support the Council in its net zero by 2030 aims.

Councillor Lawrence summed up by thanking members for their comments. He stated that there were two voting members representing Charnwood Borough Council on the Leicestershire Pensions Fund Committee, and so it was appropriate for the Council to express their views. He went on to say that there was a responsibility to ensure members of the scheme that financially prudent decisions were being made.

Following a vote, the motion was passed and it was confirmed that the Chief Executive would write to the Leicestershire Pensions Fund to inform them of the Council’s decision.