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Global debate on fossil fuel divestment heats up

07 May 2015

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Fossil fuel divestment is hitting the headlines once again this week.

Certain pension funds are moving away from fossil fuel industries and others continuing to invest – despite calls for ethical and low-carbon investing.

The World Bank is reportedly investing a large amount of money in industries such as coal and tobacco, including the Russell 3000 index, which includes coal producers Peabody Coal and Arch Coal and tobacco giant Philip Morris.

An internal post to staff, published by Reuters, said that the bank is investing part of its USD 18.8bn (GBP 12.4bn, EUR 16.8bn) staff pension fund in equity index funds that are inclusive of companies with environmental and health problems.

The investment is in contrast to the bank's proclaimed stance to be away from investments supporting tobacco and coal-based energy industries.

Meanwhile, in Denmark, three more pension funds have voted to divest from fossil fuels altogether.

Three of six pension funds for Danish professionals, covering 200,000 people and about 5% of all workers, vote in favour of divestment from fossil fuels.

Academics, civil engineers and architects voted in favour of their pension funds selling off coal and high risk oil and gas investments, because of the role of fossil fuels in driving climate change.

However, votes on divestment by lawyers, vets and other engineers were narrowly lost.

Together the six pension funds for Danish professionals cover have EUR 32bn (GBP 23bn) of assets.

Denmark's largest pension fund, PFA, has already excluded tar sands companies and PKA, the fourth largest fund which provides pensions for nurses, has excluded over 30 coal companies.

"We are very happy with the success we have had so far," said Prof Thomas Meinert Larsen, at Copenhagen University and part of the Danish Fossil Free campaign.

"It is very encouraging that we have had more support this year than last year - we think it is only moving in one direction."

However, a recent report from a financial thinktank has found that almost half the world's top pension funds are still taking little or no action to protect their investments from the effects of climate change.

The Asset Owners Disclosure Project's (AODP) annual index of 500 of the largest global asset owners found that 232 of them had done little or nothing.

Financial experts, including the president of the World Bank and the governor of the Bank of England, have warned that fossil fuel assets are risky investments because their reserves of coal, oil and gas cannot be burned if the world is to avoid the most extreme impacts of climate change.
A landmark report in 2013 showed that if these assets became "stranded" – suffering large-scale loss of value – it could destabilise global financial markets.

Julian Poulter, the CEO of AODP, said around 50% of assets held by the funds were exposed to some kind of climate risk, but many pension funds and other foundations are ignoring that risk and "betting on business as usual".

He said these asset owners were gambling that nothing would be done to curtail the burning of fossil fuels.

First published 07.05.2015

Lindsay.sharman@wilmingtonplc.com