18th September 2019

Greater Manchester Pension Fund’s Annual Report for 2019 has appeared on their website.image of the annual report cover

In summary.

The Fund acknowledges the climate crisis and is making some steps to move away from fossil fuels. But their main shareholdings still include enormous investments in coal, oil and gas companies. This commitment, which supports continued exploration and extraction of climate-destroying fuels, means that we can still not take seriously the Fund’s assertion that fighting the climate crisis is one of our highest priorities”. We need action not words.

In detail.

Several paragraphs of Chair Brenda Warrington’s introduction cover climate change and fossil fuel investments.  This attention is surely a result of our continued campaigning challenge to the Fund.  The key points, and our comments follow:

1) Climate Change is an important issue.

It has also become increasingly apparent this year that the Pension Fund’s response to the generational challenge presented to us by climate change and environmental protection is an area of significant concern for many of our members and stakeholders. …

Let nobody tell you otherwise, fighting the climate crisis is one of our highest priorities. Failure to deliver on this will not just threaten the viability of the Pension Fund, it will threaten the viability of our economy, our society, and our planet as a whole.”

We agree, and this is why we continue to campaign for action to hit the fossil fuel companies where it hurts, the value of their shares.

2) The Fund claims to have no investments in fracking.

The GMPF has no direct investment in fracking companies”

This is not exactly true. The Fund now has no investments in specialist firms that are fracking in the UK. But we note that they have considerable investments in companies (including their two biggest holdings, BP and Shell) that are heavily involved in fracking in other countries.

3) The Fund is a big investor in renewable energy.

We are also the biggest local government pension investor in renewable and efficient energy, with a half a billion allocated in a number of areas including biomass assets and a significant stake in the Clyde wind farm, one of the largest off-shore facilities of its kind in Europe.”

This is true (£607 Million in July 2019) but they are a bigger investor in fossil fuels (£1.4 Billion direct holdings and more if we count indirect investments, as of March, 2018).

Page 15 of the report shows the top 20 investments.  There is little change and Shell and BP are still in the top two places with £665 Million between them. That’s more than the value of the Fund’s renewables investments for these two companies alone.  The Fossil Fuel firms Total, Glencore, Rio Tinto, Anglo American and Centrica also appeared in the top 201.

4) The Fund pledges to be net zero carbon by 2050.

…we pledged in 2017 to become 100% net carbon neutral by 2050.”

This is far too slow, thirty one years time. Unfortunately the climate can’t wait. Moreover, it is only a commitment to being net zero carbon. While there will continue to be some carbon emissions (farming, concretan d steel, for example) once the burning of fossil fuels ends, the “net zero carbon” caveat could also mean a reliance on unproven carbon dioxide removal technologies in a vain attempt to reverse the overshoot of what are now very tight carbon budgets and even to offset continued fossil fuel burning after 2050.

5) The Fund claims that it makes a lot of money from its fossil fuel investments.

over the last 3 years, we achieved over £400 million more in returns than if we had divested from equities in such companies such as BP or Centrica, formerly known as British Gas.”

This goes against evidence that we have available on the relative performance of fossil fuel investments, and on the recent performance of those two companies. We have challenged this in our recent (unanswered) letter to councillor Warrington and asked to see the calculations that support this claim. Even if the assertion could be substantiated, we would question the use of a three year time-frame for comparison. Oil and gas stocks are significantly more valued compared to three years ago, but then three years ago they were in a dip, as this graph shows. You can prove anything be being selective with data! The claim is so vaguely made that we don’t even know if it refers to dividends or stock values. If it’s the latter, it might be a good idea to sell while they are still relatively high!

FTSE 350 Oil and gas companies share value: the long view.

FTSE 350 Oil and gas companies share value: the long view.

Elsewhere in the Annual report, we find that the Fund fell behind the local government pension funds investment performance benchmark this year. Could this be because their heavy fossil fuels weighting is not delivering for them?  Maybe. It probably reflects at least the increasing volatility of these stocks.

6) The Fund claims that it can use its position as an investor to persuade fossil fuel companies to stop selling fossil fuels.

We will also use our position on the Local Authority Pension Fund Forum to challenge companies in which we have an interest to direct their own efforts towards environment sustainability and other issues of concern to the Fund and its members. …
The Fund also co-filed a resolution requesting that BP set out a business strategy consistent with the goals of the Paris Agreement on climate change…”

We stand by our argument that while engaging with companies as active shareholders can be productive in the right circumstances, this is far from the case with the fossil fuel companies whose core business model is to extract as much coal, oil or gas as possible as quickly as possible. An illustration is in the recent revelation that the major oil companies have continued to establish exploration projects that would derail attempts to limit warming. As Carbon Tracker reports:

Last year, all of the major oil companies sanctioned projects that fall outside a “well below 2 degrees” budget …
This includes the large European companies that are doing the most to reassure investors that they are responsive to climate concerns – BP, Shell, Total and Equinor. …
The majors also hold a number of projects targeting approval this year which don’t fit in a Paris-compliant world …
The oil and gas in projects that have already been sanctioned will take the world past 1.5ºC, assuming carbon capture and storage remains sub-scale.”

Moreover, as we recently reported, companies that the Fund invests in are also financing lobby groups that oppose climate action.

Meanwhile other investors have concluded that talking is ineffective in changing fossil fuel firms’ business model. For example, the National Trust’s Chief Finance Offiver, Peter Vermuelen says,

Many organisations have been working hard to persuade fossil fuel companies to invest in green alternatives. These companies have made insufficient progress and now we have decided to divest from fossil fuel companies.”

7) The Fund pledges to move £2.5Bn from a tracker fund to a managed low carbon fund. 

As part of a recent review of investment strategy we are currently implementing £2.5 billion of the fund assets being divested to a low carbon approach targeting a significant reduction in carbon footprint and intensity..”

Well at least the Fund is using the “D word”! It sounds like a lot of money doesn’t it? But this is the total figure being switched, not the amount invested in fossil fuels. Having looked at the Fund’s most recent disclosure of its holdings and comparing this with a typical “low carbon fund”, we estimate that this is only likely to mean a real divestment of some £66M. However, until we see detail we can’t know the figure.  The Fund has yet to make this move which it has now been announcing for the last year. Nevertheless, this move, while insignificant, does show that the Fund can divest its fossil fuels, especially if we all keep up the pressure.

GMPF's investments in fossil fuels and renewables, showing the likely impact of their partial divestment announcement. We will update this once we get full details.

GMPF’s investments in fossil fuels and renewables, showing the likely impact of their partial divestment announcement. We will update this once we get full details. Fossil figures are from March 2018, renewable figures from July 2019.

8) The Fund supports the idea of a Just Transition.

Earlier in the year we signed up to ‘Just Transition’ because we know delivering a just transition will be key to the UK’s success in building a zero-carbon and resilient economy. However, we also know we need to do this in a sustainable way that supports an inclusive economy, with a particular focus on workers and communities across the country. The Paris Agreement on climate change states that its Parties take into account “the imperatives of a just transition of the workforce and the creation of decent work and quality jobs in accordance with nationally defined development priorities”.

What does this mean? It means that the Fund should be investing in ways that support the greening of the economy while creating decent livelihoods. The Just Transition Initiative, based at LSE’s Grantham Institute includes examples of fossil fuel divestment in its Guide for Investor Action. Professor Nick Robbins, one of the authors, addressed the Fund on July 19th. He supports early divestment from coal, tar sands and fracking.

So there is nothing in this rhetorical appeal to the Just Transition that contradicts what we are calling for. Elsewhere2 the Fund has suggested that a rapid exit from fossil fuels would have a disproportionate impact on livelihoods in Greater Manchester, suggesting that this is a finding of both the Just Transition Initiative and the TUC. We cannot find such references in their reports – we call on the Fund to direct us to the relevant citations. As one of the people from Just Transition Initiative pointed out to us, most of the investments of the Fund in fossil fuels are outside the region. We would add that bringing that money back could contribute to community wealth building.

Let nobody tell you otherwise, Fossil Free Greater Manchester wants to see a Just Transition from the fossil fuel economy to protect and enhance livelihoods in Greater Manchester and beyond.

With global temperatures already more than 1 degree C above pre-industrial levels, with impacts increasingly felt at all latitudes, immediate and sustained action is needed to make the transition away from fossil fuels.

In conclusion, we say to the Fund that we like their investments in renewables and their promises to make small steps towards divestment, but they need to do much more, and very quickly! That is the road to the Just Transition that the Fund now says it advocates.



1We expect the full list of holdings to appear (titled Mainstream Holdings) shortly here: https://www.gmpf.org.uk/investments/holdings.htm
From the information presented it is not easy to see if changes in the value of holdings are the result of buying and selling of shares or changes in the share value.  However, it is clear that, at least for the biggest holdings there is little change in the fossil fuel element.

2Cllr Warrington’s contribution to GMCA’s July meeting, reiterated in a Letter to Afzal Khan MP, 28 July.