A row broke out over demands for Bristol City Council’s pension scheme to sever ties with fossil fuel companies. Green councillors want Avon Pension Fund to sell all its investments in oil, gas and coal industries, insisting it is “fantasy” to believe net zero can be achieved by engaging with them and that the local authority’s 6,000 staff should be given a vote to decide.
But the city council’s representative on the local pension board, Labour group leader Cllr Steve Pearce, said it was “not a binary issue” because some of the biggest renewable energy firms were formerly traditional fossil fuel giants. And he said that most world-leading green power providers still earned a small proportion of their income from resources like coal, so divesting from these businesses would mean withdrawing funding for companies critical to low-carbon targets.
The authority’s human resources committee was told that the £5billion local government Avon Pension Fund, which thousands of employees at the West of England’s four councils pay into and rely on for retirement, has £4.1million of holdings across the top five most established oil and gas multinationals – Total, Chevron, BP, Shell and Exxon. But this equates to just 0.2 per cent of the fund’s listed equity portfolio and a mere 0.07 per cent of total assets, members heard.
However, Green Cllr Katy Grant told the meeting that the need to divest from fossil fuels was urgent and that the Avon scheme’s commitment to carbon neutrality by 2050 should be brought forward 20 years because it did not reflect the council’s climate emergency and 2030 net zero goal. She said: “It is odd that Bristol is not the loudest voice on this. There are many city councils and big pension funds around the country which have done far more and there is no reason why Avon Pension Fund cannot be one of them.”
The Clifton ward councillor said a council staff survey should be carried out to decide whether to divest in fossil fuels, a request the committee agreed to pass on to mayor Marvin Rees and his Labour cabinet. Tom Merchant, branch secretary for Unison Bristol, the biggest trade union at the council, told the meeting that it supported divestment following a vote of members two years ago but warned that the answer from all employees might not necessarily be the one Greens would expect.
He said: “There is a danger with doing a poll of the staff. If it comes back as a no, that will change the policy of our branch. Divestment is not a binary thing. A lot depends on what it is you’re trying to achieve – if that is to divest from fossil fuels, there will be unintended consequences you might not like.”
He said renewable energy company Orsted still derived two per cent of revenues from legacy fossil fuel assets. “Are you really going to say you’re never going to invest in that renewable energy company because they have two per cent income from fossil fuels?” Cllr Pearce asked.
He said less than one-tenth of one per cent of the pension fund’s total assets were in the big five fossil fuel companies and that they were held as part of a passive index tracker fund which was used for collateral purposes. Cllr Pearce said: “We hold that tracker fund because that is better than holding cash because cash always depreciates in value and a tracker fund does not. So it’s a way of hedging our exposure.
“The problem with divestment is that if you say you’re walking away from fossil fuels investment, you are also saying you are not going to invest in most of the renewable technologies either. The biggest investor and supplier of green hydrogen in Europe is Shell. Do you really want to not be investing in green hydrogen?
“Unfortunately you are not. We have no money invested in Shell apart from this fund we use for collateral. One of the biggest investors in solar energy is Lightsource BP which is 50 per cent co-owned by BP. This is not a binary issue. You need to be really careful about what you wish for.”
Conservative Cllr Richard Eddy said: “I am not exactly a tree-hugger so I have a lot of sympathy for what Cllr Pearce is saying. The pension benefits are a key component of staff benefits and we want to ensure they are properly remunerated.
“The primary role of the representative on the board is to defend and ensure the pension benefits are robust and are paid out and properly invested – that is the primary role, not to be politically correct about this.” Cllr Grant told the City Hall meeting on Thursday, April 28: “There are renewable energy companies out there who have nothing to do with fossil fuels, so it is not a question of not investing in that sector by divesting from gas or coal.”
The committee was considering Avon Pension Fund’s annual report which said £1.2billion, or 23 per cent, of its assets were invested in sustainable and low carbon equities as of March 31, 2021, with an additional £148million in renewable energy and infrastructure assets such as wind and solar projects.
