When Kent County Council tried to withdraw a hefty £250million investment in a Neil Woodford fund in mid-2019, it might well have triggered the collapse of the star investment manager’s career.
The fund’s value had fallen from a peak of £8.5bn to about £2.5bn and the council wanted to put the money into something more secure.
Their actions demonstrated the relevant committee’s sense of responsibility towards its investors – namely taxpayers. Like many investors at that time, they were keeping a dutiful eye on the market. They had decided that a fund in which a series of gambles by the fund manager had gone the wrong way. They wanted out.
The investment funds run by Woodford was suspended shortly afterwards and has now folded. Millions of investors, including Kent County Council, lost a huge percentage of their money.
The council’s actions also showed the power of owning such a huge sum and the potential effects of withdrawing the money.
Organisations such as Share Action have long since championed investors demanding that boards of directors take money out of funds which harm the planet. Many of those funds are pension pots. The process of these companies switching away from carbon emitting companies and products is called divestment. BlackRock, the world’s largest money lender, is one of their main targets.
Campaigns from pressure groups have forced BlackRock, which lends huge amounts of money to fossil fuel explorers into a (partial) rethink. Financial pages have even started to reflect how pension investors are choosing companies with excellent ethical, social and governance. And no fossil fuels, because of the growth in renewable energies and the drop in prices of oil and gas giants.
As the world fights the climate emergency, “divesting” away from fossil fuel firms is a personal choice for retail investors. It is also a choice for companies and councils whose governance has a pro-environment outlook. And yet, as reported by the Guardian last week, nearly £10bn has been invested, via pension funds, in fossil fuel firms in the past year by councils. Many of those councils have declared a climate emergency. This referred to an assessment by campaign groups Platform and Friends of the Earth.
While the Guardian does not mention all of the councils, these include Surrey County Council. According to a campaign group called Surrey Pension Act Now, this has resulted in losses of £130million in those investments, as the share prices of those funds have fallen.
It is true that major oil and gas companies have seen a fall in their share prices. For example, shares in BP were worth 555p in May 2018 and at the time of writing are worth 313p. Shell, whose shares peaked at 2,716p in May 2018 is now worth 1514p per share.
Surrey Pensions Act Now quotes the chair of the Surrey County Council fund, Tim Evans, as calling the paper losses of the pension fund as “irrelevant”. It also quotes Mark Carney, the former Governor of the Bank of England, as warning that fossil fuels face becoming “stranded assets”. Essentially worthless as they cannot be realised.
£108 million in fossil fuels
According to a handy assessment tool, available via the Surrey Pension Act Now website. This is provided by UK Divest, a campaign group. They ask people to email their councillors, or help pass divestment motions, or talk within their trade unions against fossil fuels. The platform reveals that Surrey County Council invests 2.5% of its savings in fossil fuels. That’s £108million in today’s prices. It is about the average, money wise, but puts Surrey eighth on the list. And the authority is one of three quarters of councils nationwide to have declared a climate emergency.
The drive to address the climate emergency will come from three angles: Government, giving regulatory framework and leadership (at local and national level); businesses driving change; individuals making choices, particularly as consumers, or via concerted campaigns.
It seems hugely disappointing that campaigns such as Surrey Pensions Act Now have to be formed to address a paradox. On the one hand, a council can declare a climate emergency, yet on the other it can continue to invest in carbon emissions.
Unlike national planning regulations when council planning committees consider new oil or gas sites such as at Horse Hill, this is a decision directly within the council’s control. How often have we heard from big companies “that’s a different department” when we enquire about a problem? But if a statement invokes a sentiment across an organisation, how can there be a disparity between one arm of an organisation and another?