Statement on pension funds and climate change

Mike Kirby

Mike Kirby

UNISON Scotland’s Motion 11 on Pension Funds and Climate Change led to some debate throughout the STUC Congress due to misunderstandings of the principles underpinning the motion.

As a result, UNISON Scotland withdrew its motion in favour of a General Council statement delivered by Mike Kirby, UNISON Scottish Secretary, and this is printed below.

“This statement is about the need for pension funds to start looking for suitable alternative investments that don’t contribute to global warming and climate chaos whilst protecting the value of workers’ pensions and it’s about safeguarding members at work and in the community with a real industrial strategy.

Climate change as a result of global warming is already with us.

There are no climate-change deniers in the hall so we all understand how climate changes are a result of the cumulative impact of burning fossil fuels. Apart from Trump all the governments of the world have agreed a target to reduce the use of fossil fuels in order to slow down the global rise in temperatures that are taking us to climate chaos.

And those targets will only be met if action is taken to move to a low-carbon economy which is much less dependent upon fossil fuels. Most of the carbon fossil fuels – coal, oil and gas – that are in the ground must stay in the ground.

I say most. We will always need oil and gas, particularly in relation to the chemical and science industries. We need a low-carbon not a no-carbon economy.

Of course that means we need to transition from a carbon based economy to that low-carbon future. This can’t be done overnight. It will take several years but like any journey we have to start now, before it is too late.

And as we have agreed at this congress that transition needs to be a Just Transition where communities and workers dependent on the carbon industries are not thrown on the scrapheap like others have been before.

We need investment to create new jobs and new industries. We need training and education for current and future workers to be able to transition to these new jobs and new industries.

So what has that to do with pensions?

Pension Funds exist in order to pay pensions when workers retire. They are deferred wages.

These Funds are invested in order to increase in value. So pension investments must make profits.

And this is the problem.

A large part of pension funds are invested in companies whose value is based on the fact that they own large amounts of carbon assets in the ground. And as long as they are allowed to continue digging and drilling them up those investments will remain profitable.

So there is an ethical question as to whether it is acceptable for current generations to continue profiting from such an environmentally destructive industry when the consequences for our children will be so dramatic.

However following the Paris Agreements to keep global temperatures down they will not be allowed to just continue digging and drilling and so the value of those assets will decline. They will become Stranded Assets. And the value of those companies will decline.

Pension funds need to start a process where they look for alternative investment vehicles to secure the future returns on deferred wages.

Now this is not about pulling the plug on the North Sea tomorrow. Or closing down the gas pipelines tomorrow. The STUC should continue supporting the efforts to protect these jobs today. It is about shifting investments.

Pension funds are about long term investments. So we are asking congress to address feasibility and process issues of the pension funds to start investigating alternative investments that can give us the same level of return as fossil fuels have in the past.

Our union reps on the pension fund boards are required through fiduciary duty to ensure that other investments give good returns. That means that they can’t just withdraw from fossil fuels tomorrow. They need to investigate the alternatives, consider the options and plan ahead.

And if that starts a process where those companies so reliant on carbon reserves for their value realise that they need to shift their company plans to low-carbon areas, then so much the better.

So the pension funds have a problem, and are currently part of the problem.

They can also, and must be, part of the solution.

If they are to switch investments away from fossil fuels then they will be looking for other places to invest. That should include renewable energy to light our homes. To power our public transport.

But it can also be by investing in our infrastructure

And investing in new technologies and industries, new jobs like BiFab, delivering fabrication for oil, gas, and renewables.

In fact the pension funds have to be part of the strategy to provide investments for that Just Transition we all agree is needed.

Congress this statement sets a course to address a problem and contribute to the solution that will not only protect our pensions but ensure new industries and jobs for the future.”

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