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

Ric Lander made this Freedom of Information request to Shetland Islands Council

This request has been closed to new correspondence from the public body. Contact us if you think it ought be re-opened.

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).


1 Mark Carney Bank of England, 2015. Breaking the tragedy of the horizon - climate change and financial stability. . 29 September

2 HSBC, April 16 2015. Stranded Assets: what next?

3 Mercers, 2015. Investing in a time of climate change.

4 World Bank, 2015. Major Financial Institutions Move to Integrate Climate Change December 7th

Shetland Islands Council

Mr Lauder

We acknoweldge receipt of your request for information.

This is receiving attention, and we will provide you with a response as soon as possible.

Regards, L Adamson

Louise Adamson
Committee Officer
Shetland Islands Council
8 North Ness Business Park
ZE1 09LZ

Tel: 01595 744555

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Shetland Islands Council

1 Attachment

Dear Mr Lander,

I refer to your freedom of information request. Shetland Islands Council's response to your questions is noted below:-

1. The fund has not taken any steps so far on climate change. There is no formal process in place to assess these risks.
a. The Pension Board or Committee has not explicitly discussed these issues. b. No action or strategy agreed.

2. No change since December 2015.

3. No formal survey or consultation has been conducted in the last 10 years.

4. The Pension Fund has not incurred any costs in relation to ESG engagement in the last 10 years.

5 The Pension Fund has not signed up to the UN Principles for Responsible Investment.

I trust that this response meets your request. However, if you are dissatisfied with the way in which the Council has dealt with your request for information then you may ask the authority to review its actions and decisions in relation to your request, by submitting a formal appeal. The process for lodging appeals is set out in the attached leaflet.

Yours sincerely,

Jayne Irvine
Business Support Assistant

Shetland Islands Council
Executive Services
Office Headquarters
8 North Ness Business Park

Ref. FOI 6478

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