Agenda item

Elaine Ashley had submitted the two following questions to the Committee.

Question 1

You state that you support the Engagement rather than an urgent Divestment strategy with Fossil Fuel companies (and presumably also Fossil Fuel investors such as Black Rock). I would like to know what evidence you have to suggest that this strategy is likely to work and what detailed plans you have in place to monitor what progress is being made and at what point you disengage due to lack of progress.

The divestment campaign has been developing for more than 10 years and many bodies have been pursuing a strategy of engagement for many years, even though we have seen some considerable green-washing in the fossil fuel sector, some of which has been very publicly exposed and legally challenged. We have also seen fossil fuel companies continuing with very major plans for continuing expansion and increasing output, when we know that this is disastrous for the future of life of earth, which requires 45% reduction in carbon emissions before the end of this decade, with fossil fuels being the source of the vast majority of those emissions. We have also seen major financial institutions sometimes respond to shareholder pressure one year, only to quietly reverse the changes the following year.

In terms of whether divestment works better than engagement, there is an expert review of a range of evidence that suggests that divestment does work, with further robust evidence published since that review also coming to the same conclusion.  

Additionally, one very recent report raises the risks of failing to divest very seriously indeed, while another author suggests that ‘…the financial debate about divestment is as settled as the ethical one…’ as a result of research and analysis by Black Rock. 

So there would seem to be evidence to show that Engagement does not work and the other there is major expert evidence to show that divestment does work, and, further, that failure to divest presents a very major risk. This risk is very high, and increasing all the time, in regard to Avon Pension Fund – although it has done more than many funds to move away from Fossil Fuel investments it still looks as if there is a serious danger of being left behind with stranded assets.

“ABP (Dutch Civil Service fund) are divesting over the next 10 years, while 1,500 asset managers are offloading more than $40 trillion in fossil fuel holdings,” says Shandal (Partner and Managing Director at BCG). “The trend is clearly focused on divestment rather than on engagement.”

“Investments in fossil fuel assets need to decline rapidly, because they work against the clean energy transition now and lock in GHG emissions for decades to come, leading to stranded assets in the future (Campiglio et al. 2018; Mercure et al. 2018; Kreibiehl et al. 2 022).

…Together with societal and litigation risks, these technological and policy risks cause a “transition risk” that should be managed to avoid financial instability (Campiglio et al. 2018). The bursting of a carbon bubble cannot be ruled out (Griffin et al. 2015).” UN Emissions Gap Report 2022

Question 2

How closely are you monitoring the risk of being left with stranded assets of Fossil Fuels that will have to remain in the ground?

The Head of Pensions thanked her for her questions on behalf of the Committee and said that they would reply to the points raised in writing.