County councillors have refused to commit to fully divesting the East Sussex Pension Fund from fossil fuels.
On Wednesday (September 25), East Sussex County Council’s pension committee held a long-anticipated vote on three proposals, which broadly sought to commit the fund to both making no new investments in fossil fuels and removing its current investments in the sector.
The proposals, from committee members David Tutt (Lib Dem) and Georgia Taylor (Green), were first tabled in September last year, but were deferred as the council sought information on the potential results of such a commitment.
The information came in the form of an extensive report setting out how the fund functions and the potential costs of divestment.
According to this report, “immediate divestment” could cost the fund around £79m, mostly as a result of ‘transaction fees’. Cllr Taylor challenged this figure, however, pointing out that the proposals did not call for “immediate divestment”.
Cllr Taylor also put forward what she saw as the benefits of divestment. She said: “We all do agree that fossil fuels need to stay in the ground and that the primary driver of global heating and many of the disasters we see at the moment are carbon emissions … from fossil fuels.
“Having a divestment statement and commitment is really important, not just for reducing the amount of emissions that we as a fund are responsible for … but also to ensure that the whole idea around investment anything in an organisation that actually extracts additional fossil fuels from the ground … that we would be stigmatising that.
“We would be highlighting the damage it causes and saying we will not be part of it. Eventually, as we know from evidence, this will ensure further regulation and legal frameworks will step up behind the general divestment from fossil fuels.”
Committee chairman Gerard Fox (Con) challenged this argument, pointing to the committee’s “fiduciary duty to invest the fund’s assets in the best interests of beneficiaries”.
Cllr Fox said: “It is very difficult to make a fiduciary case when stigmatisation is your principal reason for changing the fund’s direction.
“We’ve got 85,000 pensioners, who on average receive about £5,000 a year. It is their fiduciary interests, it is their deferred compensation, which we are looking on today.
“The fund is not a campaigning vehicle.”
Cllr Fox also disputed whether such a strategy would be effective in reducing the use of fossil fuels.
He said: “There is a paradox, that I refer to as the stigmatisation paradox, which is our modern civilisation is built on the exploitation of energy-dense fossil fuels but its future prosperity requires progressively reduced reliance on those energy-dense fossil fuels.
“Transiting from fossil fuel reliance to renewables will require both, for a time, to exist simultaneously.”
He added: “So I think it is impossible to stigmatise a product on which civilisation is built, which sustains current day living, which is integral to the production of critical minerals and the structure which will empower renewable infrastructure and for which a future purpose exists even in a position of a net zero scenario.”
Councillors Tutt and Taylor both disputed this view, arguing that there were also strong fiduciary reasons to support a move to full divestment.
Cllr Tutt said: “We are living in a changing world. We recognise that climate change is a reality … so legislation across the world is going to change the way that investments are valued.
“I personally believe that fossil fuel investment is a danger and a risk to this authority and our ability to pay the pensions in the longer term. I believe that there are better investment opportunities for this fund and the right decision, looking ahead as a long term investment, is to divest from fossil fuels within the next five years.”
Before making its decision, the committee heard about the practical challenges of divestment resulting from the nature of the fund.
On this point, the report said the fund does not directly invest in any companies or assets, instead putting its funds into “pooled vehicles” run by investment managers. The nature of such vehicles, the report said, means the fund has limited ability to direct investments and would only have access to a small number of vehicles which do not invest fossil fuels.
Cllr Fox also argued the fund had already taken a ‘tilt in an energy transition direction’ and that this had “come at some cost”. A similar argument was made by William Bourne, the fund’s independent advisor, who said the fund’s performance had “been poor” as a result of its avoidance of fossil investments.
Cllr Taylor challenged this view arguing such a description was a ‘misrepresentation’ of the fund’s performance. This resulted in a heated exchange between Cllr Taylor and Cllr Fox.
Following further discussions all three proposals were voted down. All three were defeated by three votes to two.
The result of the vote was met with dismay from observers in the public gallery, which included members of the campaign group Divest East Sussex.
Campaigners included Jane Ripley, who stood to make a speech, in which she identified herself as a member of the pension fund and criticised the committee’s decision. In response to Ms Ripley’s speech, Cllr Fox paused the meeting and asked for campaigners to leave the public gallery.
Campaigners then gathered outside County Hall to take part in a protest.
