Approximately £145m of the East Sussex Pension Fund is currently invested in fossil fuels (oil, coal and gas).
On 15 October East Sussex County Council debated whether or not it should stop funding climate change by freezing and then phasing out these investments. Councillors overwhelmingly rejected the motion calling on the Council to stop funding climate change and then went on to declare a ‘climate emergency’ with a 2050 deadline for decarbonising the County (ie. in line with already-existing government policy).
This was a litmus test for whether the Council is serious about taking urgent action to tackle the climate crisis and they blew it.
Check to see how your Councillor voted on Tuesday. If you’re disappointed in how they voted (eg. five Hastings Councillors did a u-turn, reversing their April 2016 votes in favour of divestment on Hastings Borough Council) then let them know! You can find the contact details for your Councilor here: https://democracy.eastsussex.gov.uk/mgFindMember.aspx
THE THREE MOTIONS
Following the debate, three motions were voted on:
(1) a motion to divest the Fund from fossil fuels (proposed by Cllr Stephen Shing and seconded by Cllr Ruth O’Keeffe – see below for the full text);
(2) a substantive motion moved by Liberal Democrat Councillor David Tutt, requesting that the Fund instruct its investment consultants (Hymans Robertson) ‘to provide an analysis of the implications of fossil fuel divestment [and] it’s associated risks and opportunities … to allow the Fund to decide whether it can meet its long-term strategic objectives if it divest [its] current fossil fuel holdings’ – something that Divest East Sussex has been calling for for over 2½ years;
(3) a woolly motion, moved by two Conservative Councillors,‘Request[ing] that the Pension Committee asks its investment consultants to undertake a further investigation … [on how] it might further integrate ESG [Environmental, Social and corporate Governance] considerations … into its investment strategy.’ We expect little or no progress on divestment as a result of this motion.
(1) The divestment motion* (motion (1)) received four votes in favour: Councillors Ruth O’Keeffe, Daniel Shing, Stephen Shing and Trevor Webb. The 11 Liberal Democrat Councillors all abstained. 35 Councillors voted against it: Three of the four Labour Councillors (Tania Charman, Godfrey Daniel and Phil Scott), all of the Conservative Councillors and two of the Independent Councillors (Charles Clark and Deirdre Earl-Williams).
(2) David Tutt’s substantive motion requesting an analysis of the implications of fossil fuel divestment received 18 votes in favour (Labour Councillors Tania Charman, Godfrey Daniel and Phil Scott, all of the Liberal Democrat Councillors, plus Councillors Charles Clark, Ruth O’Keeffe, David Shing and Stephen Shing and Councillor Ruth O’Keeffe). 31 Councillors voted against it: all of the Conservative Councillors and Councillor Earl-Williams. Councillor Trevor Webb abstained.
(3) The woolly Conservative motion requesting ‘further investigation’ received 49 votes, all Councillors voting in favour except for Councillor Trevor Webb who voted against.
COUNCILLOR SHING’S DIVESTMENT MOTION
The text of Cllr Stephen Shing’s motion was as follows:
The Council’s current policy of “engaging” with fossil fuel companies has been unsuccessful, And its continued investments in fossil fuels are “no longer aligned with the interests of the [East Sussex Pension] Fund” and pose “a material financial risk” to the Fund.
I therefore propose that, in line with its Responsible Investment Policy, the East Sussex Pension Fund: (a) immediately freezes any new investment in the top 200 publicly-traded fossil fuel companies; and (b) that it divests from its existing investments in these companies within five years.
The Pension Fund’s Responsible Investment Policy states that: ‘Ultimately the Fund will always retain the right to disinvest from certain companies or sectors in the event that all other approaches are unsuccessful and it is determined that the investment is no longer aligned with the interests of the Fund or that the issue poses a material financial risk.’
This is precisely the situation that we are currently in with respect to the Council’s investments in the fossil fuel sector:
(A) ‘all other approaches are unsuccessful’
The East Sussex Pension Committee has agreed that ‘The Fund’s long-term goal is for 100% of assets to be compatible with the net zero-emissions ambition by [approximately] 2050 in line with the Paris agreement’. Yet, according to a September 2019 analysis by the Transition Pathway Initiative – a project that the Pension Committee says provides them with an important aid for the Fund’s ‘understanding of where companies are placed in the transition to a low carbon economy and their competence to manage this transition’ – despite many years of “engagement” not a single major oil company has re-aligned its business model with a 2ºC world, let alone a 1.5ºC world. Indeed, according to another recent analysis, this time from Carbon Tracker, ”every major oil company is currently betting heavily against a 1.5˚C world and investing in projects that are contrary to the Paris goals”.Moreover, there are no precedents for a company changing its core business model following pressure from shareholders.
(2) ‘it is determined that the investment is no longer aligned with the interests of the Fund’
Indeed, in their latest report, the institutional investment advisor Mercer conclude that: ‘Advocating for and creating the investment conditions that support a “well-below 2⁰C scenario” outcome … is most likely to provide the economic and investment environment necessary to pay pensions … over the timeframes required by beneficiaries.’ Investing in fossil fuel companies that have not yet their business models with a 2ºC world (let alone a well-below 2 degrees scenario) – and who have spent $1bn since the 2015 Paris climate agreement ”on misleading climate-related branding and lobbying – efforts are overwhelmingly in conflict with the Paris goals and designed to maintain the social and legal license to operate and expand fossil fuel operations’ – is therefore not aligned with the interests of the Fund.
(3) ‘the issue poses a material financial risk’
As far back as March 2017, the chair of the Pension Committee acknowledged that ‘[The] East Sussex Pension Fund is a member of the Local Authority Pension Fund Forum (LAPFF) which recognises the issue of stranded assets and continued fossil fuel extraction as a collective investment risk for all asset owners.’ Likewise, the Governor of the Bank of England, Mark Carney, has warned that investors in these industries face ‘potentially huge’ losses from climate change action that could make vast reserves of oil, coal and gas ‘literally unburnable’.