More than 60 civil society leaders including MPs, climate experts, faith leaders and local councillors have signed an open letter accusing pensions and financial inclusion minister Guy Opperman of backing continued investment in fossil fuels.
Writing in The Telegraph earlier this month, Opperman argued investors with environmental concerns should hold onto their stocks in oil and gas companies so they can "nudge, cajole or vote firms towards lower-carbon business practices".
The minister has since sought to clarify his position, arguing that divestment "should be part of a strategic approach to managing pension schemes' exposure to risk, rather than something to be used by default" but that "forcing pension schemes to divest and sell their assets to others would be self-defeating and counterproductive".
But his comments have triggered a fierce backlash from divestment campaigners. Prominent voices including Green party MP and former leader Caroline Lucas, former Archbiship of Canterbury Rowan Williams and climate scientist Kevin Anderson from the Tyndall Centre for Climate Change Research signed an open letter criticising Opperman for ignoring the "clear moral, scientific and financial arguments for fossil fuel divestment".
"Despite clear evidence that we need to leave fossil fuels in the ground, companies such as Shell and Exxon are planning to significantly expand fossil fuel extraction by 2030," the letter states. "For every £1 invested by fossil fuel majors, over 95p ends up in further expansion of oil and gas reserves that are incompatible with a net zero trajectory," it adds, drawing on research by the Carbon Disclosure Project (CDP).
Opperman had originally argued that rather than exert pressure through divestment, investors should practice "constructive engagement" with fossil fuel companies. But the signatories of today's letter, which also include Mark Campanale - founder of the influencial Carbon Tracker think tank - said such tactics were misguided, adding that divestment can help protect people's pensions from being lumbered with investments in stranded fossil fuel assets as the world transitions to a low carbon economy.
"Mr Opperman's assertion that collaboration through investor engagement can turn fossil fuel majors into low-carbon companies is not borne out by evidence," the letter states. "Investor pressure has never reshaped any company's core business and cannot transform an entire sector of powerful multinationals."
Current government guidance to pension fund trustees acknowledges divestment as an appropriate strategy for those wishing to take action to tackle climate change.
And today Nest, one of the UK's biggest auto-enrolment pension funds, announced a fossil fuel divestment timeline as part of plans to move towards a net-zero investment portfolio by 2050. The pension scheme aims to fully divest from companies involved in thermal coal, oil sands, and Arctic drilling by 2025.
In Westminster, meanwhile, 360 serving and former cross-party MPs have so far backed phasing out fossil fuel investments from the Parliamentary Pension Fund, including Labour leader Sir Keir Starmer, Department for Environment, Food and Rural Affairs minister Rebecca Pow and Committee on Climate Change chairman Lord Deben.
Responding to today's criticism, however, Opperman reiterated the government's commitment to achieving its 2050 net zero goal. "We cannot do this alone and expect companies and pension funds to join us in being part of the change to net zero," he added. "Our 2019 changes to regulations on environmental, social and governance issues are changing the way pension funds and asset managers operate. Forcing pension schemes to divest and sell their assets to others would be self-defeating and counterproductive."
This article was first published by our sister title, Business Green.
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