How to pursue divestment

Advice for councillors

Here are some steps that councillors can follow to advance fossil fuel divestment in councils:

  1. Use UK Divest’s tool to find out how much the local government pension fund invests in fossil fuels.
  2. Find out if your council has declared a climate emergency and what measures were put in place regarding its investments.
  3. Find out about other councils that have divested. Contact them for advice or support for your case.
  4. Meet with the head of finance to convey your concerns and find out if they have assessed the risks of fossil fuel investment or raised concerns with the Pensions Committee, or, if the pension fund is administered by another local authority, raise it directly with their head of finance.
  5. Raise the matter with colleagues on relevant committees, in your party group, in your local branch and with the relevant trade unions to gain support for a change in policy.
  6. Find out which organisations and public bodies use the fund and consider reaching out to these organisations and their employees to broaden support for change.
  7. Propose a motion to full council issuing support for divestment of the local government pension fund from fossil fuels. An example motion follows.
  8. If your motion is passed ensure the matter is passed on to the Pension Committee for action, even if the Committee is housed in another local authority.
  9. If applicable get nominated to your council’s pension fund committee to oversee divestment and advocate for responsible and sustainable pension practice.
  10. Consider investigating other ties with fossil fuel companies including sponsorship deals, procurement and venue use. Seek adoption of a council-wide sustainable investment policy or Treasury Management Strategy which excludes investment in fossil fuel companies and encourages zero carbon and socially responsible investment.
  11. Connect with local climate campaigners to see how you can work together – click here to see if there is a divestment group active near you. You can also reach out to groups affiliated with Friends of the Earth (click here for groups in England, Wales and Northern Ireland or click here for groups Scotland) or other climate networks, such as Extinction Rebellion.
  12. Get in touch with UK Divest to discuss next steps for advice on how to proceed.

Template motion

The following text can be used as the basis for a motion in favour of fossil fuel divestment. Fill in the blanks with your local authority’s details, and add any additional information that may be relevant; for instance, if the council has declared a climate emergency.

The motion is suitable for use in LGPS Administering Authorities and for Local Authorities with no direct control over pension investments (click here for a short explainer outlining the difference between different local authorities and their direct responsibility for the fund). Similar motions have been passed in Administering Authorities, for example Glasgow City Council, which administers the Strathclyde Pension Fund.

[Insert Council] Divestment Motion 

[Insert Council] notes:

  • [Insert Council] has around [insert figure from UK Divest tool] invested in fossil fuels via the Local Government Pension Scheme.
  • The United Nations Paris Agreement, reaffirmed at the 2021 Glasgow Climate Summit, commits our governments to keep the global temperature increase to under 2 degrees and aim for 1.5 degrees. Carbon budgets produced by the Intergovernmental Panel on Climate Change, United Nations and the International Energy Agency show that preventing two degrees of warming relies on not burning the vast majority of all proven fossil fuels.
  • The UN International Energy Agency (IEA) predicts that global oil demand will significantly fall by 2030, leading their Executive Director to refer to oil and gas companies as potential ‘junk investments.’[1] Action by governments to limit carbon emissions will ultimately leave fossil fuel reserves unburnable. It’s been estimated that this asset bubble, known as the ‘carbon bubble’, may be over €1 trillion in Europe alone.
  • Former Bank of England Governor Mark Carney warned that fossil fuel investments risk becoming “stranded assets” as investors exit the sector. “A question for every company, every financial institution, every asset manager, pension fund or insurer – what’s your plan?”[2]
  • Pension funds have a fiduciary duty to consider the material risks of continued investment in fossil fuels. Fiduciary duty is defined by the Law Commission as “ensuring that pensions can be paid, ensuring that this is undertaken at the best possible value”.
  • Pension funds have a legal duty to treat members “fairly as between them”. That means taking seriously the longer-term interests of younger members who may be affected more by the climate transition.

This Council commits to:

1. Reviewing its Investment Strategy and developing and implementing a Responsible Investment Policy which rules out new investments in fossil fuel companies. 

2. Calling on [Insert Council]’s Pension Fund to divest from fossil fuels through the development and adoption of responsible investment policies which:

a. Immediately freeze any new investment in the top 200 publicly-traded fossil fuel companies.[3]
b. Divest from direct ownership and any commingled funds that include fossil fuel public equities and corporate bonds within [insert agreed number of years given market forecasts].
c. Set out an approach to quantify and address climate change risks affecting all other investments.
d. Actively seek to invest in companies that will reduce greenhouse gas emissions and minimise climate risk. 

3. Recognising that fossil fuel investments should be considered as part of the council’s “carbon footprint” and divesting our pension fund is one of the most impactful steps we can take to reduce our impact on our community and the world.


Footnotes:

[1] Energy Investing: Exploring Risk and Return in the Capital Markets, Joint Report by the International Energy Agency and the Centre for Climate Finance & Investment, Paris. Available at: https://www.iea.org/reports/energy-investing-exploring-risk-and-return-in-the-capital-markets 

[2] https://www.bbc.co.uk/news/business-50868717  

[2] As determined by the most recent Carbon Underground 200 list published by Fossil Free Indexes: https://www.ffisolutions.com/research-analytics-index-solutions/research-screening/the-carbon-underground-200/