The Scottish Local Government Pension Scheme and its fiduciary duty to manage climate change risk

The request was successful.

To whom it may concern,

In the last year, the Governor of the Bank of England (1), HSBC (2), Mercers (3) and the World Bank (4) have made it clear that climate change is a major and growing financial issue. Mark Carney has said that climate change poses physical, liability and transition risks, which are all increasing.

Therefore, it is in the best interests of the SLGPS to have regard to the financial risks posed by climate change, and take appropriate steps to manage these risks.

We are writing to the Chair of the Pension Committee, or other appropriate Council official, to set out the response of your fund to five questions:

1. What steps is the fund taking to address the financial risks posed by climate change? Is there a formal process for regularly assessing and reducing exposure to these risks? In particular, can you provide details of:
a. When the Board or Pensions Committee has explicitly discussed carbon bubble risk and the financial implications of growing defaults and credit risk for fossil fuel companies; and
b. What action or strategy the fund has agreed upon, to manage and reduce carbon bubble risk/exposure to fund members?

2. The December 2015 Paris Agreement on climate change saw Governments agreeing to keep global warming to well below 2 degrees, which will require the overwhelming majority of the world’s proven fossil fuel reserves to remain unburned, which would lead to substantial stranding of fossil fuel assets held by corporations in which your fund may currently be investing. On April 22nd 2016, the Paris treaty was signed by 175 countries. Since December 2015 how has your pension fund changed its approach to climate change risks, given the Paris Agreement’s significant ratcheting up in the global response to climate change risks?

3. Have you surveyed or formally consulted with your individual members or employers for their views on your ESG policies or practices in the last 10 years?

4. How much does the fund spend on ESG engagement services and can you give any examples of engagement activities relating to climate change/carbon risk from the last 10 years?

5. Have you signed up to the UN Principles for Responsible investment?

We are asking these questions of all UK local authority pension funds, as part of a survey to assess whether pension funds’ fiduciary duties are being met in regard to climate change financial risks. If you would be able to respond to these questions by the end of July 2016 we would be extremely grateful. Please accept this letter as a request for information under the Environmental Information Regulations 2004, alternatively the Freedom of Information Act 2000.

Please do contact me if you would require further information.

Yours sincerely

Ric Lander
Friends of the Earth Scotland
5 Rose St, Edinburgh EH2 2PR
0131 243 2718
[email address]

Friends of the Earth Scotland is an independent registered Scottish charity (SC003442).

References

1 Mark Carney Bank of England, 2015. Breaking the tragedy of the horizon - climate change and financial stability. www.bankofengland.co.uk/publications/Pag... . 29 September

2 HSBC, April 16 2015. Stranded Assets: what next? http://www.businessgreen.com/digital_ass...

3 Mercers, 2015. Investing in a time of climate change. http://www.mercer.com/our-thinking/inves...

4 World Bank, 2015. Major Financial Institutions Move to Integrate Climate Change
http://www.worldbank.org/en/news/press-r... December 7th

Freedom of Information, Scottish Borders Council

Dear Mr Lander

I acknowledge receipt of your request for information relating to the
above and shall respond within the relevant 20 working day period.

Yours sincerely

Information Management Team

Scottish Borders Council

Newtown St Boswells

TD6 0SA

E mail:  [email address]

Tel: 0300 100 1800

 

 

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Freedom of Information, Scottish Borders Council

Dear Mr Lander

 

The above request is exempt under S39(2) Environmental Information of
FOISA  therefore we respond under the Environmental Information (Scotland)
Regulations 2004.

 

1.       No formal process undertaken by Scottish Borders Council Pension
Fund in relation to assessing the financial risks posed by climate
change.  No discussion has taken place by the Pension Fund Board or
Committee in relation to the carbon bubble risk.

2.       There has been no change in the Funds approach to climate change
risk.

3.       Yes, in 2010 a consultation process was undertaken with members
for their views on social investments.

4.       The Fund bears no direct costs on ESG engagement activities, all
relevant ESG activities are delegated to external fund managers – see
below.

5.       The Fund has not signed up to the UN Principles for Responsible
Investment, but it is a requirement on tendering for Investment Fund
Managers that they are signed up.

To put the answers above into context, Scottish Borders Council Pension
Fund has recently appointed a new Pension Fund Advisor and is currently
undertaking a strategic asset investment review.

 

The pension fund does not manage or carry out any direct investments.  It
manages its investments via external investment fund managers who have
responsibility for the selection, retention and realisation of individual
investments. Where appropriate, they also implement the pension fund’s
policy in relation to corporate socially responsible investment and
corporate governance which can be found in the funds Statement of
Investment Principles – link below:

 

[1]https://www.scotborders.gov.uk/downloads...

 

Section 6 details the Funds stance on ESG Issues.

 

I can to advise that you have a right to request a review within 40
working days of receipt of this email.  You should either e-mail
[2][Scottish Borders Council request email] or write to the Information Manager, Scottish
Borders Council, Council HQ, Newtown St. Boswells TD6 0SA.

 

If after the Council’s FOI Advice Group have considered your review and
you are still not happy with the decision you then have a right to appeal
to the Office of the Scottish Information Commissioner, Kinburn Castle,
Doubledykes Road, St. Andrews, fife KY16 9DS.

Yours sincerely

Jenna Waldie

for the

Information Management Team

Scottish Borders Council

Newtown St Boswells

TD6 0SA

E mail:  [email address]

Tel: 0300 100 1800

 

 

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References

Visible links
1. https://www.scotborders.gov.uk/downloads...
2. mailto:[Scottish Borders Council request email]

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