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

The request was refused by Dumfries and Galloway Council.

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

Dumfries and Galloway Council

Thank you for your request for information which was received on 27/06/2016 which we are dealing with in terms of the above legislation. We have given your request the unique reference 201649 and we would appreciate it if you could quote this on all correspondence to us.

Under the terms of the legislation, we have an obligation to respond to your request within 20 working days from the day after your request was received. We will therefore aim to respond to your request by 25/07/2016.

Please be aware that, in some circumstances, a fee may be payable for the retrieval, collation and provision of the information you have requested. If this is the case, a fees notice will be issued, which would need to be paid in order to progress your request.

If your request for information is considered and deemed as a 'business as usual' request, it will be responded to by the appropriate Service within the Council.

If you have any queries in the meantime, please contact [email address].

Kind Regards

FOI Unit
Dumfries and Galloway Council

--
Any email message sent or received by the
Council may require to be disclosed by the
Council under the provisions of the Freedom
of Information (Scotland) Act 2002.

Dumfries and Galloway Council

Please find below the Council's response to your request 201649 which was received on 27/06/2016.

Details of request: 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.

Response:

In accordance with Section 17(1)(b) of the Freedom of Information (Scotland) Act 2002, Dumfries and Galloway Council advises you that it does not hold any information pertaining to the questions asked in your request.

Please be aware that the Council holds the copyright, where applicable, for the information provided and it may be reproduced free of charge in any format or media without requiring specific permission. This is subject to the material not being used in a misleading context. The source of the material must be acknowledged as Dumfries and Galloway Council and the title of the document must be included when being reproduced as part of another publication or service.

If you require any further clarification, please contact us. However, if you are not satisfied with the way in which your request has been dealt with, you can request us to carry out an internal review of the decision by emailing [email address] within 40 working days of receiving this response. Thereafter, if you remain dissatisfied with our review decision, you can appeal in writing to: The Office of the Scottish Information Commissioner, Kinburn Castle, Doubledykes Road, St Andrews, Fife, KY16 9DS.

Kind Regards

FOI Unit
Dumfries and Galloway Council

--
Any email message sent or received by the
Council may require to be disclosed by the
Council under the provisions of the Freedom
of Information (Scotland) Act 2002.

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