Last week, the London assembly told mayor Boris Johnson to pull City Hall’s £4.8bn pension fund out of coal, oil and gas investments, after assembly members voted on a motion to support the fossil fuel divestment movement.
The motion calls on the mayor to publicly support the principle of divestment and to begin the process of ridding the London Pension Fund Authority (LPFA) of its fossil fuel portfolio. But the vote is non-binding, meaning the mayor is bound only to consider its proposals and write a response.
The Green Party’s Jenny Jones proposed the motion, which was unanimously supported by Labour and the Liberal Democrats. Six of the Conservative’s nine members were absent. Those who were present voted against.
Jones told the Guardian last week she was “delighted” the motion had passed and while it had no executive value, it would force Johnson to seriously consider divestment.
“It’s impossible to know what the mayor thinks on any one subject at any given hour of the day, quite honestly. And I would imagine that he would think this is scaremongering,” Jones said. “But people who know more about climate change than he does, which isn’t difficult obviously, feel that this is an urgent threat. And I think there’s a lot of people out there that think this is very timely and might even encourage the mayor to listen.”
Though Johnson was not present at the plenary meeting and declined to comment on his position on divestment, a spokesperson for Johnson said, “The Mayor will consider all of the Assembly’s motions at today’s plenary. The Mayor takes climate change mitigation extremely seriously and is helping drive forward the transition to a low carbon economy.”
A spokeswoman for campaigners Divest London said the motion would force the mayor to reveal his position on fossil fuels and reinforce his intention to meet his commitment to reduce London’s carbon emissions by 60 percent by 2025.
“This is a really positive step forward and puts pressure on Boris to divest London from fossil fuels. He came into office making big promises on carbon emissions reductions for London and he has been very good at ignoring them. The motion forces him to make clear his position on fossil fuels, and particularly fracking, to the British public,” she said.
The vast majority of coal, oil and gas reserves cannot be burned if global emissions reduction targets are to be met. High-profile investors, including the Bank of England, said this places the companies that own these reserves at financial risk, though with shareholder concerns about fossil fuels’ role in climate change continuing to increase, it’s clear maintaining business as usual poses financial risks of its own.
The LPFA manages the pensions of City Hall employees and many other local authorities. It holds roughly £48m worth of shares in some of the companies most exposed to risk of stranded fossil fuel reserves — Rio Tinto, Shell, BP and BHP among others. It also holds shares in several cigarette giants.
The global divestment campaign argues that institutions such as the LPFA have a financial and moral imperative to dump their shares of fossil fuel companies. Labour’s environment spokesman Murad Qureshi called on the mayor to support the motion divesting from fossil fuels, and make London a “world leader in tackling the injustice of climate change.”
“Agreeing to divest from fossil fuels would not only boost London’s contribution to tackling climate change and secure our capital’s future prosperity, it would offer reassurance to those concerned the mayor had lost sight of [his emissions reduction] objective,” said Qureshi.
“Moving public sector pension investments away from industries and fuels of yesterday and instead investing in growing new green industries is an important part of the vital mix of policies we must now fully adopt to end our long standing dependence on fossil fuels,” said the assembly’s Liberal Democrat environment spokesman, Stephen Knight.
Yet Conservative assembly member James Cleverly said divestment was “fundamentally flawed.”
“I think there are better ways of generating social good with the pension fund,” he contended. “Rather than preventing funding in certain areas, I think it is much more productive to encourage finance in places we know people can be directly helped.”
As global investors become more aware of and concerned about the long-term stability of their investments, fossil-free financial portfolios are quickly becoming the norm. In 2014, the US’ first Fossil-Free Index was launched and the number of investment professionals in the US offering fossil fuel-free portfolios jumped by more than 50 percent over the previous year.
Seeing the turning tide, some oil and energy companies are beginning to consider their own long-term sustainability: Last March, shareholders prompted ExxonMobil to agree to publish a Carbon Asset Risk report describing how it assesses the risk of stranded assets from climate change; last month, Royal Dutch Shell’s board of directors ratified a shareholder resolution that commits the oil giant to investing in a low-carbon future; and in December, German power and gas giant E.ON announced it is splitting its operations into two companies, one of which is entirely focused on renewables.