Our reply to South Yorkshire Pension Fund

Following the delivery of our petition (opens in new window) to South Yorkshire Pension Authority and the reponse (opens in new window) from its Fund Director, we’ve now had a chance to put together our reply.We’ve written to the Fund Director and also sent it to several of the councillors who are members of the Authority (opens in new window):


7 February 2016

Dear John

Thank you for your letter dated 23 December acknowledging receipt by the Authority of our petition and restating your position regarding climate change action as presented at October’s Annual Fund Meeting.

On behalf of Sheffield Climate Alliance, we are writing to say how disappointed we are that your reply addresses neither the views expressed by the 143 fund members requesting the implementation of an ethical investment policy nor the four suggestions for further action we proposed at the December Board meeting.

We are pleased to hear that the Board will receive a full report on the outcome of the Paris COP 21 and would like to be present when the Board considers this. Please let us know when this will be discussed. The risks related to climate change affect everything. Business as usual is not a safe option. Please see the attached document for more on the latest national and international responses and initiatives.

In the meantime, we note that although divestment from fossil fuels is an option open to pension fund trustees, it was not included in your summary of the ways the Authority can address climate change issues.

In The Law Commission’s 2014 Review of Fiduciary Duties it concluded that where trustees think environmental, social or governance issues are financially material they should take them into account. The Commission also made clear that the law permits trustees to make investment decisions that are based on non-financial factors, provided that there is no risk of significant financial detriment to the fund, and that trustees have good reason to think that members would share the concern. This includes members’ ethical concerns and quality of life.

Respected figures from all quarters have spoken in favour of divestment. “We support divestment as it sends a signal to companies, especially coal companies, that the age of ‘burn what you like, when you like’ cannot continue,” said Nick Nuttall of the UN framework convention on climate change in March 2015. In June of last year, Sir Mark Moody-Stuart, former chairman of Shell, said that investors moving their money out of fossil fuel companies is a rational response to the industry’s “distressing” lack of progress on climate change. Indeed, in late November 2015 the University of Sheffield committed to divest its £39 million endowment from all fossil fuel companies. Contrast this with SYPA’s current £24 million investment in BHP Billiton, the company with the sixth largest coal reserves in the world.

A decision to divest from fossil fuels need not be taken on ethical grounds alone. In a legal opinion from the pre-eminent legal expert Christopher McCall QC, published in November 2015, he states that, given the potential magnitude of the financial risks associated with investment in what might be ‘stranded assets’, all fiduciaries “must be ready to consider, with the benefit of advice, the extent to which the risks associated with carbon intensive assets may currently be underappreciated and not fully priced into the market.” McCall goes on to say that such investments may prove to be “pregnant with material financial risk” and that “any prudent trustee” should think about how best to manage and mitigate any such risks.

Furthermore, the effectiveness of engagement as a strategy to bring about the creation of a low-carbon future is disputed. Despite the existence of groups such as the Institutional Investor Group on Climate Change, of which SYPA has been a member since 2004, and their active pursuit of a policy of engagement “finance continues to flow unabated into the fossil fuel industry. At the current rate of capital expenditure, the next decade will see over $6 trillion allocated to developing the fossil fuel industry. In 2012 alone, fossil fuel companies spent $674bn on exploration and development projects” (from Food, Fossil Fuels and Filthy Finance, Oxfam briefing, October 2014). Shell may have stopped its drilling for oil in the Arctic but it is still pursuing extraction of fossil fuels elsewhere.

Leading asset managers too have cast doubts on the changes that engagement will result in the type and scale of changes needed to avoid runaway climate change. “Engagement is good, but if you only talk and do not put real pressure on, it does not achieve much,” advised Frédéric Samama, of Amundi, the French asset management company, quoted in May 2015 on the FT website.

In closing, we would like to repeat our suggestion of four steps for the Authority to take in response to the petition delivered to the December Board meeting. These were to:

  • accept members’ ethical concerns as a driver for investment policy
  • canvas the entire membership to ascertain their views about an ethical investment policy (along with a programme of balanced information to inform their decision)
  • continue to build Board members’ knowledge of divestment issues and the re-investment options available to pension funds. Our offer to co-organise a workshop on this topic still stands
  • use the opportunity afforded by the Authority’s carbon audit to better align the current portfolio with members’ views.

Yours sincerely

Kate Stott and the following members of Sheffield Climate Alliance: we are all also fund members:

Genevieve Ashton, Sean Ashton, Beverley Booker, Anna Brook, Rob Campbell, Greg Challis, Susannah Diamond, Helen Fox, Lesley Moran, Deborah Parker, Mark Pearce, Dr Emma Wilkinson

Why it is important to take action now

We, as a planet, are heading for a global temperature rise of 3-4 degrees and that is only if all the Paris promises are delivered on time. Otherwise if we maintain a course of business as usual, we are headed for 4-6 degrees. This is an emergency — we have to take the steps needed to turn this (CO2 emissions) tanker around. Human civilisation is at risk; action has to happen sooner rather than later. How our Pension Funds act really does matter. On such a serious issue we, Sheffield Climate Alliance, ask for exemplary member engagement and propose, at the very least, a participatory workshop with all board members, national experts and ourselves and other interested parties.

Climate change action and global finance

Below are a sample of articles illustrating current thinking and the latest initiatives to create a sustainable future.

  1. The World Economic Forum Risk Report rates the failure of climate change adaptation and mitigation as having the greatest potential adverse impact on business followed by water scarcity.


  1. This year holds out the promise of being the “year of green finance”. China has established a Green Finance Study Group in the G20 to be co-chaired by the People’s Bank of China and the Bank of England, with UNEP acting as secretariat. Many other countries are driving forward progress at national and global scales.

The United Nations Environment Programme’s Inquiry into the Design of a Sustainable Financial System (UNEP Inquiry) is organizing two events in London and Washington D.C. to discuss its findings and the historic opportunities going forward.

See more at:


  1. “The City of London Corporation is determined that 2016 be the year in which policymakers and practitioners convene to drive the long-term development of the UK’s green finance sector,” said Sir Roger Gifford, chair of the new Green Finance Initiative, in a statement. “As the UN Environment Programme put it so clearly, the financial system we need is one that fully supports and facilitates the transition toward a low-carbon economy, and we believe London can play a leading role in this process.”