County Council says it will “eliminate” investments in fossil fuel companies who do not respond to “engagement”

Press release
Divest East Sussex [1]
5 December 2017

COUNTY COUNCIL SAYS IT WILL “ELIMINATE” INVESTMENTS IN FOSSIL COMPANIES WHO DO NOT RESPOND TO “ENGAGEMENT”
Urgent need for action on investments in BP and Exxon pressed by public at County Council meeting

5 December 2017, County Hall, Lewes: The East Sussex Pension Fund will “eliminate” investments in fossil fuel companies that do not respond appropriately to its current strategy of “engagement”, the Chair of the East Sussex Pension Committee, Councillor Richard Stogdon, told the Full Council meeting of East Sussex County Council (ESCC) this Tuesday (5 December) [2].

Eleven members of the public from across East Sussex attended Tuesday’s meeting to ask questions about the Council’s continued investments in giant oil and gas companies like BP and Exxon.

Among other things, the Council’s attention was drawn to a recent open letter, signed by dozens of Church of England clergy, including five bishops, calling on the Church of England – and by implication other institutions – to divest from Exxon. The letter cited a recent Harvard academic study which found that Exxon knew about the risks of climate change in the 1970s, yet misled the public for decades – for example, by taking out paid editorials in major US newspapers questioning whether global warming was real and caused by humans [3]. It also noted  that – according to one recent financial analysis – ExxonMobil risks wasting between 40% and 50% of its future capital expenditure on projects that are not aligned with the Paris agreement targets that seek to reduce greenhouse gas emissions [3]. As at 30 April 2017, ESPF had £2m of local people’s pension monies invested in common stock in Exxon [4].

Though Councillor Stogdon refused to acknowledge that the Council’s current policy of “engagement” with these companies was “unlikely to succeed”, he was unable to provide  any historical precedent for an entire industry completely transforming itself in the face of major challenges while the bulk of the individual companies continued to provide a decent return to investors. [5]

Investments in fossil fuels (oil, coal and gas) have become increasingly controversial, with over 680 institutions in 76 countries, managing assets worth more than $5 trillion, making some form of divestment commitment since 2012 [6]. UK public pension funds lost nearly £700m during 2014/15 when the value of their investments in the coal industry plummeted [7].

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 at least £150m invested in fossil fuels [8]. 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 [9].

Gabriel Carlyle, a spokesperson for Divest East Sussex, said: ‘The Council’s current strategy of “engaging” with companies like Exxon and BP is extremely unlikely to achieve the phasing-out of these companies at the speed that’s required if we’re to avoid catastrophic climate change. Indeed, according to the Local Authority Pension Fund Forum: ‘Virtually all the oil majors in Europe (and the US) continue to plan on rising demand for oil and gas and have planning scenarios that reflect this’, with scenarios in which governments take action to limit climate change ‘largely ignored’ [10]. Furthermore, if its current “engagement” strategy fails, the County Council will have retained its exposure to investments whose value could drop rapidly as a result of new climate change laws or emerging technologies like electric vehicles. This is why we continue to believe that divestment from the oil industry is the correct response to these risks.’

Arnold Simanowitz, from Lewes, 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. Once we get 5,000 signatures on the Divest East Sussex petition the County Council’s own rules state that Councillor’s will have to debate the issue [11]. We therefore 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.’

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] Cllr Richard Stogdon, Chair of the East Sussex Pension Committee: “”… all these stocks which have been mentioned are being specifically looked at and we are committed, as we have said, to engagement with the relevant companies. And if … the companies are not giving us the response we will be eliminating in due time investment in them” (answer to supplementary question from Arnold Simanowitz, https://eastsussex.public-i.tv/core/portal/webcast_interactive/321194, from 20 mins 25 secs).

[3] https://www.theguardian.com/environment/2017/nov/07/church-of-england-should-lead-on-climate-change-by-divesting-from-exxonmobil

[4] https://www.whatdotheyknow.com/request/breakdown_of_east_sussex_county_2#incoming-989418

[5] In response to a (verbal) supplementary question from Esme Needham, Councillor Stogdon stated that: “The Committee is not of the view that engagement with fossil fuel companies – responsible fossil fuel companies – is unlikely to succeed.” A written question from Pension Fund member Greg Lewis-Brown, had noted that: ‘At the 21 March 2017 Full Council meeting Councillor Stogdon explained that the East Sussex Pension Fund was “engaging” with fossil fuel companies through its membership of the Local Authority Pension Fund Forum, and that the latter’s approach is “to undertake robust engagement on aligning their business models with limiting climate change to a [two degrees Celsius] increase in global temperatures and to push for an orderly low carbon transition.”’ Mr Lewis-Brown then asked: ‘What historical examples, if any, can the Committee or its Fund Managers provide of an entire industry completely transforming itself in the face of major challenges while the bulk of the individual (pre-transformation) companies continue to provide a decent return to investors?’ Councillor Stogdon’s (non-)answer reads, in full, ‘The Pension Committee believes that encouraging development of low carbon align business model [sic] across the entire oil industry is in the best interest of the Fund. The Fund does not comment on the investment performances and decisions of others. However, in the face of major challenges, the Fund delivered an absolute return of 20.3% over the twelve month period to 31 March 2017, outperforming its customised benchmark by 1.4%. Results are considered by the Committee on a quarterly basis.’

[6] https://350.org/big-divestment-news/

[7] ‘Millions wiped off UK local government pensions due to coal crash, analysis shows’, Guardian, 12 October 2015, https://www.theguardian.com/environment/2015/oct/12/millions-wiped-off-uk-local-government-pensions-due-to-coal-crash-analysis-shows

[8] ‘Breakdown of equity exposure’ in ‘Climate change, carbon risk and investments’, document circulated by investment consultants Hymans Robertson at the East Sussex Pension Fund training day on 13 June 2017.

[9] ‘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.

[10] ‘Engaging for a low carbon transition: Why a 2 ̊C business model is less risky than ‘business as usual”, Carbon Tracker and Local Authority Pension Fund Forum, July 2016, http://www.carbontracker.org/wp-content/uploads/2016/07/Engaging-for-a-Low-Carbon-Transition-v7.pdf

[11] https://www.eastsussex.gov.uk/media/5138/petition-scheme-final-july-2014.pdf

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