Pension funds should not dump holdings of fossil fuel companies despite the growing pressure on asset managers to divest “planet-wrecking” stocks, a government minister has said.
Guy Opperman, pensions minister, said the funds managing the retirement savings of millions of investors would impede broader efforts to tackle climate change if they offloaded shares in companies with high carbon footprints, such as oil and gas suppliers.
“I massively believe that it is perfectly appropriate for trustees to hold stocks in the likes of Shell or BP; I do not want them to divest,” Opperman said in an interview with the Financial Times.
“What we want is a partnership between trustees, asset managers, and the companies as these companies transform themselves into clean energy companies and find the solutions that we all need for net zero.”
A number of ethical investment products, marketing themselves as “fossil fuel free”, have launched in the UK, often holding technology and financial stocks rather than those of fossil fuel companies.
“Merely selling your stocks that make you look bad from a fossil fuels standpoint is a reverse greenwashing because it doesn’t actually fix the problem,” said Opperman.
The minister’s comments come as pressure grows on some of the UK’s largest public sector pension funds to drop “planet-wrecking” stocks.
Analysis released this week by campaign groups Platform and Friends of the Earth found that British town hall pension plans held £9.7bn of investments in fossil fuel companies in the 2019/20 financial year.
“If the government is serious about showing leadership on climate ahead of COP26, it needs to stop fooling itself that continuing to invest in fossil fuel companies offers any solution to the climate crisis,” said Rianna Gargiulo, divestment campaigner at Friends of the Earth.
“All this talk of engaging with fossil fuel companies to help them change for the better ignores the vast sums of money they pump into political lobbying and further extraction, and their stated commitment to burning all of their reserves.”
Some private sector retirement schemes have outlined plans to rid their portfolios of the most harmful fossil fuel holdings.
Scottish Widows, which has £170bn of funds under management, said in November it would divest at least £440m from companies that had failed to meet its ethical investing test, including those that derive more than 10 per cent of revenue from thermal coal and tar sands.
“Scottish Widows strives to engage with and influence companies it invests in to drive positive change,” the company said.
“Its exclusions focus on companies it believes pose the most severe investment risk due to the nature of their businesses.”
ShareAction, the campaign group, said it “largely” supported Opperman’s approach of engaging with companies to push for positive change but said pension schemes should not fear dumping stocks.
“A credible escalation strategy has to include the possibility of divestment when all else fails,” said Catherine Howarth, chief executive of ShareAction.
Make My Money Matter, which campaigns for greener investments, said it was “absolutely crucial” that pensions reflected savers’ demands.
“There are many people who simply no longer want to be associated with — or profit from — companies which have done the most to contribute to climate change,” said Tony Burdon, chief executive of Make My Money Matter.
“We think this moral argument is also very important.”