Oxfordshire Pension Fund has committed to shift 15% of its assets – some £470m – into a fund offering rapid decarbonisation and divestment from fossil fuels.
The decision, which comes in the same week as Harvard announced it is divesting from fossil fuels, marks a key turning point for the local government pension scheme, which manages over £3bn of funds for around 60,000 members.
The fund’s Committee voted unanimously on Friday to shift all passive equities into a new fund aligned with the FTSE-Russell Paris Aligned Benchmark. The move will see the Oxfordshire Pension Fund immediately drop exposure to companies that generate more than 1% of their revenues from exploration, mining or processing of coal and companies which derive 10% or more of their revenues from the exploration, extraction, distribution or refining of oil fuels. Companies generating 50% or more of revenues from the exploration, extraction, manufacture or distribution of hydrocarbons, hydrogen and carbon monoxide mixtures will also be excluded. This will result in a near-instant 50% reduction in carbon intensity of the portfolio.
Tobacco, controversial weapons and companies breaching the United Nations Global Compact are also excluded.
Green councillors played a key role in the move, with Committee member Cllr Jo Robb speaking in favour of shifting the pension fund’s passive portfolio into a fund aligned with ambitious and rapidly decarbonising FTSE-Russell Paris Aligned Benchmark. Since becoming a Committee member in 2019, Jo has worked for Scope 3 emissions to be factored into the Pension Fund’s carbon analysis and has also pushed for the Pension Fund to divest from assets with high fossil fuel reserves and companies which invest in exploration for new reserves.
Welcoming the decision, Jo said “Only a few years ago, members of the Committee were suggesting that climate change was not a consideration for the pension fund and that divesting was not a proper exercise of fiduciary duty. This important decision shows how far the Pension Fund has come in such a short space of time.”
Speaking at the Pension Fund Committee meeting, Cllr Robb, District Council representative on the Pension Fund Committee and a member of the Fund’s Climate Change Working Group said, “If we are to save the planet, we need to rapidly decarbonise and the FTSE Paris Aligned Benchmark enables us to do this.”
“We have to keep 60% of known oil and gas reserves in the ground unburned and 90% of known coal reserves in the ground unburned if we are to stay anywhere near 1.5 degrees. That is enormous stranded asset risk that we will be removing from our balance sheets if we move over to the PAB benchmark.”
In 2019, South Oxfordshire District Council passed a motion proposed by Jo calling on the Oxfordshire Pension fund to divest from fossil fuels.
The decision on Friday follows years of work by successive Committees members and campaigners to remove fossil fuel risk from the Oxfordshire Pension Fund in order to protect member benefits from what is likely to be a rapid unravelling of carbon-intensive industries.
After years of disagreement, Oxfordshire Pension Fund agreed a Climate Change policy in 2020, following a Climate Change Workshop run by an independent facilitator.