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Fossil Free presentation

Presentation to the Strathclyde Pension Fund board on 17 February 2017
by

Mathieu Munsch

on 18 October 2017

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Transcript of Fossil Free presentation

A vision towards a sustainable future: Divestment as an enabling force
Risks posed by fossil fuel investments
A more secure investment strategy
Fossil fuel investments are also financially risky
The case for fossil fuel divestment
By Fossil Free Glasgow
Why divestment?
What does this mean for pension funds?
Different scenarios for different futures
Drastic measures are suddenly taken to stay under 2°C
Hard limits on extraction are set
Shares in fossil fuel companies lose all their value
The world fails to curtail its fossil fuel consumption
Oil & gas investments continue to be profitable
Runaway global warming
Who we are
Raising awareness of the link between finance and the climate crisis;
Campaigning for responsible institutions to take part in driving positive social change through their choice of investments.
Our aim:
Our group:
Fully composed of volunteers, concerned for our future;
Grew out of the Glasgow University divestment campaign, which succeeded in 2015.
Fossil fuel shares
Responsible institutions
Sustainable activities
Average investor
Divestment
Buys up the shares
Ethical reinvestment
Reduces profitability
Profit loss
Joins the trend
Strathclyde Pension Fund was reported to have already lost £26 million in 2015 (Guardian)
Coal companies are first on the line: Peabody Energy filing for bankruptcy in April 2016.
Oil & gas unprofitable without public subsidies and unconventional extraction methods
Our network:
We are part of a global movement of active citizens taking it into our own hands to accelerate the transition away from fossil fuels;
In Scotland, we collaborate with Unison, Friends of the Earth and Common Weal as part of the Reinvest Scotland campaign
Source: https://www.theguardian.com/environment/2015/oct/12/millions-wiped-off-uk-local-government-pensions-due-to-coal-crash-analysis-shows
SPF's direct investment portfolio already has great examples of how to do this right.
Local projects benefiting local economy
Energy efficient and resilient infrastructure
Community energy projects
Divestment is also about strategically allocating assets to accelerate a shift that is already in place.
A pension fund is above all a guarantee for the future. It only makes sense to align its investments with that role.
A limited carbon budget
Fossil fuel reserves (known and economically recoverable):
2600Gt
of CO2
Developed reserves (already in production):
940Gt
of CO2
Emissions per year:
40Gt
of CO2 (from fossil fuel)
Carbon budget for 2°C:
600Gt
of CO2
Fossil fuel reserves = assets of fossil fuel companies
80% of reserves are unburnable
80% of the value of fossil fuel assets is imaginary (stranded assets)
Not only 80% of coal, oil and gas reserves have to be kept in the ground, one third of already existing projects will have to be prematurely canceled
940Gt
>
600Gt
Total budget:
600Gt
/ Yearly emission:
40Gt/year
=
15 years
before 2°C
As temperatures rise, so do the impacts
What are governments doing?
This is from 2011
Total budget=> 565Gt
Annual emission=> 40Gt

2°C reached in 15 years
Paris Agreement: latest milestone in international response to climate change
All countries on Earth agreed for the first time to limit global warming to 2°C
Pledged to make efforts to limit to 1.5°C
G7 nations set deadline to end fossil fuel subsidies by 2025
Ratified in October 2016, it is now part of international law
Things are moving forward, but is it enough?
Current pledges fall far short of their target
National ambitions will have to be drastically revised upwards over the very short term
Every delay now will require even bolder and more disruptive measures to be taken in a couple of years
A slide from SPF's presentation at the June AGM
The International Energy Agency (IEA) and the US Energy Information Administration (EIA) make
projections based on
current
policies
.
The scenario they describe is that of
business-as-usual
.
Basing investment decisions on such projections is an open commitment to go well beyond the 2°C threshold
Investment decisions cannot just look at political and economic trends, and
disregard the laws of physics
when assessing future risks.
Society becomes so dysfunctional that securing pensions will be the least of our worries
A large scale financial crisis is triggered, and pension funds cannot deliver on their mandates
A third way?
A third way:
Move your money before it's too late
Sustained investment in fossil fuel is making a choice between environmental breakdown and economic collapse,
neither of which are acceptable options.
Taking preventive action to
divest from fossil fuel is the rational thing to do
—whether it is for financial security, or to ensure that we even have a future in which people can hope to receive a pension.

The only universe in which investing in fossil fuel still makes sense is that in which
climate risk is underestimated
.
The elephant in the room: lack of understanding on climate change
Still a widely-held view across the investment community and in high offices, despite unanimous scientific consensus.
Acceptance of the science makes it crystal clear that carrying on as we do is simply not an available option.
The only acceptable choice we now have is to ask:
How do we break away from our addiction to fossil fuel?
(and fast enough!)
What about other strategies, such as engagement?
Decisions to divest have concrete financial repercussions.
The global divestment movement: A rising financial force
Divestment isn't just a vision for the future, but an already ongoing trend:
It build confidence in indexes that exclude fossil fuels;
It unlocks investments for sustainable alternatives;
It lowers the value of fossil fuel assets.
SPF previously dismissed resolutions on fossil fuel divestment on the ground that
"active engagement with fossil fuel companies would address the issue of climate change more effectively"
.
But does this claim hold up to scrutiny?
For one thing,
engagement does nothing about the fact that fossil fuels are stranded assets
The fund is still exposed to the financial risks that result from the fact that 80% of fossil fuel companies' assets (the coal, oil, gas field that constitute their value) cannot be used.
SPF may responsibly engage with corporations to improve their practices (preventing spillages, improving worker’s rights, etc.), but
it cannot prevent them to carry out their core activity
—the extraction of fossil fuels, which is the main driving force of the climate crisis.
In 2015 alone, the top 200 oil, gas and coal companies
spent $674bn on exploration for new reserves
, under the assumption that
‘the world will fail to limit global warming under 2ºC’,
while actively working through trade lobbying groups to
undermine climate legislation and spread doubt about climate change
.
The track record of fossil fuel companies certainly raises doubts on the
"effectiveness"
of engagement;
However, it is in its very premise that the strategy fails:
companies cannot willingly put themselves out of business by renouncing their core business model
.
Fossil fuel investments put us at risk by slowing down the energy transition
Divestment is not only morally right, it is also the rational thing to do in the short term.
References
Investment figures:
https://gofossilfree.org/uk/pensions/

Carbon bubble figures:
Anderson, Kevin. ‘Duality in Climate Science’. Nature Geoscience 8, no. 12 (December 2015)
Oil Change International, ‘The Sky’s Limit: Why the Paris Climate Goals Require a Managed Decline of Fossil Fuel Production’, 22 September 2016
Carbon Tracker, ‘Unburnable Carbon – Are the World’s Financial Markets Carrying a Carbon Bubble?’, November 2011.

Emission pathways:
IPCC, Climate Change 2014: Mitigation of Climate Change. Fifth Assessment Report: Summary for Policymakers
Sabine Fuss et al., ‘Betting on Negative Emissions’, Nature Climate Change 4, no. 10 (October 2014): 850–53
Reinvest Scotland campaign
Divestment can be turned into an asset for a better Scotland
Mathieu Munsch
Strathclyde Pension Fund:
a few figures
SPF's fossil fuel investment account for
£890 million
(5.5% of total assets)
Direct investments:

As of March 2016:
£246 million in direct investments
£644 million estimated from its largest pooled funds
£55 million
£28 million
£18 million
£17 million
£15 million
£10 million
(to name just the most well known)
Second largest pension fund in the UK in terms of fossil fuel investment (after Manchester)
Other
UK pension funds
—notably that of other local councils in Waltham Forest and Southwark.
2016 saw the commitments of
5 capital cities across Europe
: Paris, Berlin, Copenhagen, Oslo and Stockholm.
A
quarter of all UK universities
have now made commitments to divest.
Global commitments to divest have been made across 690 institutions in 76 countries, representing
$5.4 trillion
in assets under management. (half of which were made in the last year alone)
For references, click here:
Full transcript