Agenda item

The following question was asked by Councillor Ed Gemmell under section 2.17 of the Committee Procedure Rules

(a) Overall viability of the fund in relation to the Climate and Ecological Emergency: Is the Committee aware that pension funds themselves have the power to determine their own strategy and policy position in relation to sector-wide divestments? If so, why is the Committee currently retaining investments in fossil fuels? On what basis do they consider that the benefit to the fund is greater by staying with fossil fuel investments rather than disinvesting from them?  This question entails:  

* financial benefits or risks, concerning stranded assets and volatility, including in conventional terms within existing financial markets and activities

* risks to future beneficiaries, associated with a possible contribution to societal breakdown, breakdown of the financial system including the pension industry, loss of nature and increase in extreme weather; 

* the ethical imperative that is part of the committee’s responsibility, to consider stewardship of the earth that is our home and thus to stop investing in fossil fuels which are causing damage to our planet which will only repair on a timescale of millennia

The Committee has a fiduciary duty to act in the best financial interests of the Fund’s members and employers and seek to obtain the best financial return that it can for members and employers against a suitable degree of risk, given that any shortfall in returns will have a direct impact on employer contribution rates and therefore Council Tax payers. This is a fundamental principle; however, the Fund is also mindful of its responsibilities as a long term shareholder.

The Committee believes that environmental, social, and corporate governance (ESG) factors, including climate change, will have a material impact on investment risk and return outcomes, and that good stewardship can create and preserve value for companies and markets as a whole. The Committee recognises that long term sustainability issues present risks and opportunities that increasingly require explicit consideration when investing the Fund’s assets.

The majority of the Committee does not consider a top-down approach to disinvestment to be an appropriate strategy for reducing climate and carbon risk and contributing towards reducing carbon emissions. Instead, the Committee believes that decarbonising the Fund’s portfolio over time by reducing its exposure to carbon intensive companies and assets, and seeking to influence the behaviour of companies through engagement, will have a more beneficial impact. 

In order to target net zero the objective is to decarbonise investments by 2050 in line with Bucks Council strategic objective, with the Committee broadly supportive of Brunel’s interim objective for a 50% carbon emission intensity reduction by 2030.  The Committee will be carrying out further work to develop its net zero pathway in the coming months, including climate scenario analysis. The Buckinghamshire Pension Fund reported 22% carbon efficiency in December 2020. At the end of December 2020 the Fund had 22% fewer carbon emissions than similar companies in the investable universe.

The Pension Fund is due to undertake a review of its Investment Strategy in light of the triennial revaluation results that are due by the end of this calendar year.