Council’s decision to divest from fossil fuels helps tackle climate emergency and create a better environment

23 July 2019
Town Hall

In 2016, Waltham Forest Council became the first UK local authority to announce it would divest its pension funds away from oil, gas, or coal stocks over the course of a five-year period. The latest audit shows that the decision has resulted in a 44 per cent reduction in the estimated value of the fossil fuel stocks held by the council in three years.

The Pension Fund Committee made the ground-breaking decision to divest from fossil fuels for both environmental and financial reasons. Reducing investment in fossil fuels means a cleaner environment for everyone. It also helps protect the pension fund against possible future underperformance of oil, gas, and coal stocks as the world moves toward a low-carbon economy.

On 31 March 2017 – the end of the financial year in which the divestment decision was made – the council’s pension fund held £53.4m in oil, gas, and coal stocks. On 31 December 2018 that figure was £30m, a reduction of 44 per cent. In percentage terms oil, gas, and coal stocks now account for 3.4 per cent of the pension fund’s total value, down from 6.6 per cent.

The move to divest from fossil fuels is being phased in over a five-year period. As investments are made over long time periods, decisions or changes to these long-term investments should not be made without carefully examining the implications. The council has a responsibility to carefully manage its pension fund so that it provides enough return to support retirees who depend on it.

To help achieve its divestment aims, the council appointed three new managers to oversee its global equities stock. One of these new managers was specifically tasked to identify emerging markets where investments could be made in stocks with minimal carbon footprints. The initial phase of identifying divestment opportunities in global equities took place in 2017 and 2018. Money began to transfer to new funds through 2018 and 2019 and its impact is shown in these most recent figures.

In the UK, councils invest through pooled funds to reduce their exposure to risk. Pensions for all 32 London boroughs are managed through the London Collective Investment Vehicle (CIV). Despite significant cost benefits using the CIV does present challenges to the council’s goal of divestment, as its priorities may not be the same as the wider pool’s.            

Cllr Johar Khan, Pension Fund Committee Chair, said: “We call on the Government to give us more freedom to directly appoint fund managers who have more scope to identify and pursue investment opportunities. We also want to work with the CIV to help them identify and provide suitable investment opportunities – not just for our funds, but for all the local authority pension funds they manage.”

Cllr Clyde Loakes, Deputy Leader and Cabinet Member for the Environment, said: “I am proud of the work done to reduce the council’s pensions fund investment in fossil fuels – but we cannot rest on our laurels. There is still much more that must be done to tackle the climate emergency and safeguard the environment for future generations, and we will continue to work toward reducing our investments in fossil fuels to help achieve that future.

“It’s all well and good declaring a climate emergency, which we have done – but what really matters is taking the necessary action to reduce the impact we are having on the planet. We need all need to work together across neighbourhoods, communities, towns and cities to achieve real change. That means the Government working with and actively supporting councils, businesses, community groups and residents to tackle this issue – before it is too late.”

Divesting from fossil fuel investments is just one of the approaches Waltham Forest Council is taking to tackle the climate emergency and reduce air pollution, which in London alone causes up 9,400 deaths per year. Other measures include the establishment of a climate emergency commission to look at how the council can further reduce its emissions, extensive road and public realm improvements around the borough to promote walking, cycling, and sustainable transport, and the creation of a trial Low Plastic Zone in Leytonstone town centre to encourage small businesses to move away from ecologically damaging single-use plastics.