The Scottish Local Government Pension Scheme and its fiduciary duty to manage climate change risk
Ric Lander made this Freedom of Information request to Fife Council
This request has been closed to new correspondence. Contact us if you think it should be reopened.
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
Dear Fife Council,
I note that my FOI request has not been responded with the deadline now almost a month ago. Please inform me of when you will respond with the information.
Yours faithfully,
Ric Lander
Good Afternoon
Unfortunately we do not seem to have received your request, Could you please re-send your request in full to [email address] and we will respond as soon as possible.
Regards
Shannon
Shannon Guthrie
Information Management & Requests
Customer Service Improvement
Communities
Fife Council
1st Floor
Fife House
Glenrothes
KY7 5LT
Dear Shannon,
I have copied and pasted my original request, below. This request was sent to all Scottish local authorities that run LGPS in June, and all the other authorities have now responded.
If you could advise me when I will recieve a reply this would be greatly appreciated.
Ric
***
The Scottish Local Government Pension Scheme and its fiduciary duty to manage climate change risk
23 June 2016
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
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. http://www.bankofengland.co.uk/publicati...
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...
Dear Ric Lander,
ENVIRONMENTAL INFORMATION (SCOTLAND) REGULATIONS 2004 – REQUEST FOR INFORMATION
Thank you for your information request dated 24/08/2016 ; our reference: 14497. This is being dealt with in terms of the Environmental Information (Scotland) Regulations 2004.
The Regulations allow 20 working days to deal with your request from the date that we received it, but we hope to provide you with the information you are looking for at an earlier date where possible.
Yours sincerely
S Guthrie
Dear Ric Lander,
ENVIRONMENTAL INFORMATION (SCOTLAND) REGULATIONS 2004 – REQUEST FOR
INFORMATION
I refer to your information request received 24/08/2016 10:08, our ref:
14497.
I am pleased to enclose the information you requested and trust that it
meets your requirements.
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?
The pension sub-committee is fully aware of the issues around carbon and
climate change. Equally, sub-committee members are aware that their role
is to maximise returns for members of the pension fund. To ensure that
this is done in a socially responsible way, the pension sub-committee has
engaged Hermes Equity Ownership Services (EOS) to engage with companies
in which the Fife pension fund is invested. The sub-committee has a
strong belief that engagement with companies is the way to change
behaviours and ensure that investing is socially responsible. Hermes EOS
provides the sub-committee and officers with regular reports on its
engagement activities, including question and answer sessions.
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?
The pension fund has not changed its approach since December 2015, but
continues to work with its investment managers and Hermes Equity Ownership
Services, which engages with companies on environmental issues .
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?
We have not surveyed or consulted with individual members or employers,
but employee and employer representatives attend quarterly Committee
meetings.
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?
The pension fund spent £86k on ESG engagement services in 2015/16. I
attach examples of engagement activities relating to climate change/carbon
risk.
5. Have you signed up to the UN Principles for Responsible
investment?
No.
I would like to draw your attention to the copyright situation in relation
to the material.
The Council holds the copyright for all of the material 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
derogatory manner or in a misleading context. The source of the material
must be acknowledged as Fife Council and the title of the document must be
included when being reproduced as part of another publication or service.
If you are not satisfied with the way we have handled your request, you
have the right to request a review of the decision. Please write to: Head
of Legal Services, Finance & Corporate Services, Fife House, North Street,
Glenrothes, KY7 5LT or e-mail to [email address]. The law
provides for you to make this request up to 40 workings days from when you
receive this correspondence. We add a further three working days to allow
time for delivery of our response giving you up to 43 working days from
the date of this correspondence to ask for a review. Where the outcome of
the review fails to resolve the matter to your complete satisfaction you
have the right to apply to the Scottish Information Commissioner for a
decision.
Fife Council will consider and seek to resolve any request to the Head of
Legal Services that falls outside this timescale.
Yours sincerely
Deborah McKay
Information Officer
Information Requests
Communities, Customer Service Improvement
1st Floor, Fife House
North Street
GLENROTHES
Fife
KY7 5LT
Tel: 03451 555555 x 441266
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