Welsh pension funds ‘still investing in firms that create climate change’

Martin Shipton

A climate change group has accused Welsh public sector pension funds of ignoring clear instructions to move money out of oil and gas.

Divest Cymru argues that pension contributions from local authority and other workers should no longer be invested in companies such as Shell, Exxon, Total, Chevron and BP, and instead should be used to boost sustainable energy projects in Wales.

In 2022 the Senedd passed a motion which required all Welsh local authority pension funds to get rid of their investments in fossil fuels by 2030 at the latest. Cardiff council’s pension funds committed to fully divest from fossil fuels in 2019, and many other county councils including Ceredigion Carmarthenshire and Swansea have passed similar resolutions.

Yet in spite of such motions, Divest Cymru says it appears that fund managers, who have day to day control over investment decisions, have a very different approach from elected lawmakers.

Data obtained by the pressure group shows that meaningful divestment is not happening. A freedom of information request has revealed that the Wales Pension Partnership (WPP), which oversees investment from the eight funds in Wales, still has more than £125m invested in just four fossil fuel companies: Shell, BP, Exxon and Total Energies.

There are also large investments in many other fossil fuels companies, which altogether amount to more than 11% of total holdings. This is at odds with the Welsh Government’s commitment to net zero.

Positive change

Divest Cymru says the WPP is opposed to moving funds from gas and oil, arguing that positive change is best achieved by talking to the big corporations through asset management consultants.

A spokesman for the WPP has stated: “The engagement approach is to support investment outcomes by encouraging risk mitigation, best practices adoption, and strategic thinking on the most material opportunities through building mutually beneficial long-term relationships with the investee companies. Continued engagement is likely to be more effective than divestment or exclusion. Therefore, ongoing dialogue with companies is a fundamental part of a responsible investing strategy”.

But Divest Cymru argues there is no evidence that such engagement has had any influence at all on fossil fuel companies and that fund managers are not taking climate change seriously.

‘Business as usual’

Caspar Harris, a spokesman for the group, said: “The policy of engagement allows the WPP to appear to be doing something while continuing with business as usual, which is the business of environmental destruction and runaway greenhouse gas emissions for a short-term profit. Pension holders are meanwhile largely unaware that the money they believe to be invested in the future is not only at risk but is funding environmental destruction and runaway greenhouse gas emissions.”

The divestment group points out that since it was established in 2017 the WPP has not withdrawn any investments because of concerns about a company’s environmental policies. Neither has it filed any proposals related to the phase out of fossil fuels. Nor has it sent out any formal letters to companies relating to their investments in fossil fuels.

Divest Cymru argues that to meet climate objectives we need to stop investing in polluting fossil fuels companies and reinvest these funds into more ethical, environmentally sustainable companies and infrastructure. It maintains that the potential for investment in Wales is enormous with a desperate need to fund local green energy.

Mr Harris said: “Senedd Members have expressed their clear view that by continuing to buy shares in big oil corporations local pension funds are contributing to the climate crisis. Divest Cymru strongly suggests that Welsh leaders employ joined-up thinking by working with the WPP to make divestment the preferred mechanism to clean up local authority pensions.”

Different approaches

The WPP didn’t respond to our request for a statement. However, in February 2024 it published an All-Wales Climate Report which reviewed its members’ different approaches to investment from the perspective of tackling climate change.

The report said: “To seek to ensure consistency, the WPP will take the following actions:

* Recognising the growing focus on individual corporate outcomes, the WPP will develop a focus list of companies that will be subject to enhanced scrutiny and reporting.

* The WPP will review its climate-related stewardship theme to ensure it is sufficiently strong in its expectations of investee entities. It will review the information it is able to capture from its service providers and other third parties that would better allow it to demonstrate progress against this theme. Any changes in approach at a WPP level will be cascaded to individual funds, who will frame their expectations to others outside the pooling environment.

* In line with its existing commitment, the WPP has pledged that specific consequences are connected to companies not meeting climate-engagement objectives, with a strict escalation strategy for companies that do not make sufficient progress. This escalation policy will be published during 2024.”