Presenting the case for divestment to Bolton councillors
On 10th February we attended Bolton council’s Corporate and External Issues Overview and Scrutiny Committee. We were invited as a follow-up to discussions about the fate of the council’s earlier motion calling on Greater Manchester Pension Fund to divest from fossil fuels.
Bolton is among the GM Councils who actively support the call for GMPF to divest from fossil fuels. Here we report on an interesting development.
Bolton’s March 2019 motion called on the GMPF to:
- Immediately freeze any new investment in fossil fuel companies, including those engaged in fracking operations and exploration;
2. Divest investments from any company that is involved in the exploration for or production of coal and unconventional oil or gas (fracking) within 2 years,and from all fossil fuel companies within 5 years;
3. Work with the Greater Manchester Combined Authority to develop and fund a sustainable low carbon investment programme for Greater Manchester.
The scrutiny committee has been trying to find out what progress has been made since then. So far, Bolton’s member on the Pension Fund’s Management and Advisory Panel (elsewhere called the Pensions Committee) has not received an answer to questions from the Fund. The committee asked both the Pension Fund and ourselves to attend its meeting. The Pension Fund did not attend (more on this below). We received a friendly welcome and after our presentations were able to answer a series of perceptive and in some cases challenging questions. You can see a video of the meeting here. The relevant section of the whole meeting is from approx 0h:9m to 1h:25m.
We are grateful to the committee and its chair Richard Silvester, for the invitation and for the opportunity for a serious and mature discussion.
A challenge to the right of Greater Manchester councils to scrutinise the fund
As we noted, the pension fund did not attend. At the December meeting of the committee, Bolton’s borough solicitor had argued that scrutiny of the Fund was not within the legitimate scope of the committee. She suggested that the Bolton rep’s only role was to “have oversight and understanding of GMPF’s actions and feed in to ensure Bolton’s contributions are as low as possible.” Her interpretation was disputed by the Chair of the Committee, Councillor Richard Silvester (Labour) and by the proposer of the original council motion, Councillor Roger Hayes (leader of the Liberal Democrat group). A well-informed discussion followed including the relevance of climate change to all the GM councils and that fossil fuel holdings possibly becoming stranded assets due to climate policies was a financial risk for the council. The committee chair then took the unusual step of declining to follow the Borough Solicitor’s advice. (Click for the video: from 0hrs:42min to 1hr:11min).
GM councils’ right to investigate if the fund is investing wisely
Our understanding is as follows. The Pension Fund is administered by Tameside council on behalf of the other employers, including the other 9 GM councils. Tameside delegates that responsibility to the Fund, in the form of the Pensions Committee (here called the Management Panel). Tameside has 10 councillors on that body, the other councils have one each. That committee has the responsibility to administer, invest and manage pension funds on behalf of the scheme managers (i.e. the managing authority, Tameside – note 1). The other council representatives therefore have a responsibility to Tameside council, although they are appointed by their own council, which, however, does not have responsibility for the Fund. Does this mean that the other councils cannot scrutinise the Fund? We doubt it. Current government guidance on Overview and Scrutiny responsibilities of local government makes it clear that committees increasingly have to look beyond the council itself. This is particularly because so many council responsibilities are provided by partner or contracted organisations. The guidance notes that committees have a particular interest in following the “council pound” – reviewing whether money provided by the council is being used appropriately. It has a material interest in what happens to the employer contributions it makes to the Pension Fund (note 2). Moreover, despite the responsibilities of the nominated councillor on the pensions committee, the nominating council has a reasonable interest in the discussions and decisions, for instance in the important matters of making sure that GMPF is investing wisely and therefore protecting members’ pensions, as well as minimising employers’ contributions the representative is party to. Conversely, Tameside Council has a responsibility to the participating GM authorities to administer the Fund on their behalf, and it is arguable that they are not exercising that responsibility reasonably at the moment because it seems they are not responding to communications and queries from those authorities.
There should be no obstruction to the democratic scrutiny of public investments.
1) See the guidance from the Pensions regulator. Administer, invest and manage pension funds on behalf of the scheme managers.
2) “Following the council Pound” paragraph 46b in the Statutory guidance on scrutiny https://www.gov.uk/government/publications/overview-and-scrutiny-statutory-guidance-for-councils-and-combined-authorities/overview-and-scrutiny-statutory-guidance-for-councils-and-combined-authorities#power-to-access-information The guidance makes no specific mention of Pension Funds but the general principle is clear enough.