Latest correspondence with ESCC Pension Fund Panel – February 2015

See below the latest correspondence with the ESCC Pension Fund Panel (I sent an email December 2014, and received a response February 2015). For the full timeline of previous correspondence with the Pension Fund Panel please see this page. I am currently considering how to respond to this email and will post up further exchanges.

31/12/2014

Dear Marion Kelly (cc: Cllrs Stogdon, Carstairs, Tutt, Wealls, Sykes, Redman),

I am responding to an email sent by Mo Hemsley on 4th April 2014 about the ESCC Pension Fund, which I attach below. I apologise for the delay in my response, due to unforeseen circumstances, however I hope we can continue an exchange on this subject.

I will go through the points that Mo made in the last email, and respond to them in turn:

Mo: “Many thanks for your e-mail and I believed a response was sent to you on my behalf on 16th December 2013, which confirmed that my response to you in my letter dated 13th September 2013 appropriately dealt with issues raised in your e-mail.”

Me: The letter that was sent to me on the 16th December, which although Mo claims appropriately dealt with the issues raised in my email, did in fact answer almost none of the questions I asked. I would like those questions answered, and I will restate some of them in this email. If you can not directly answer my questions, I would also like to be informed about any complaints and/or appeal procedures which are open to me to get them answered.

Mo: “However, following my previous response to your e-mail, the East Sussex Pension Fund has since become a member of the Local Authority Pension Fund Forum (LAPFF –website link below). This forum is the UK’s leading collaborative shareholder/members/officers engagement group, which seeks to protect and enhance the value of its members’ shareholdings by way of share holder engagement, by action on corporate governance issues and by seeking to promote the highest standards of corporate social responsibility at the companies in which LAPFF members invest.”

Me: While it is very promising that the East Sussex County Council Pension Fund has become a member of the LAPFF, I am unclear how being a member of LAPFF has changed the investment practices of ESCC Pension Fund. Could you tell me, since becoming a member of LAPFF, how exactly have the investment – and other – practices of the ESCC Pension Fund changed? Please provide as much detail on this as possible.

Divestment, especially from tobacco companies

In the previous emails I asked specifically about the potential for ESCC Pension Fund to divest from tobacco, fossil fuel and arms companies and the possibilities for positive investment of the Pension Funds’ assets.

While many Pension Funds are already also divesting from fossil fuels (1) (2) and arms companies, in this email I will just focus on the potential for divestment of tobacco holdings.

Firstly, and maybe most importantly, are you aware of the recent legal opinion of Nick Giffin QC (3), requested by the LGPS Shadow Scheme Advisory Board, where he explicitly stated:

“the administering authority can in principle have regard to wider considerations where that does not run the risk of material financial detriment to the fund. So, for example, if social housing was a good investment financially, and the precise location was immaterial, the authority for the Greater Manchester Pension Fund could in my view choose to invest in social housing in Greater Manchester rather than in Cornwall. Likewise, if tobacco investments were seen as deleterious to the health of the population, they could be avoided if but only if that did not endanger the diversity of investments or the returns likely to be achieved.”

He also stated:

“the precise choice of investment may be influenced by wider social, ethical or environmental considerations, so long as that does not risk material financial detriment to the fund.”

This legal opinion paves the way for local authority pension funds, such as the ESCC Pension Fund, to look for alternatives to tobacco that deliver the same long-term investment returns.

Previously, some of the councillors on the ESCC Pension Fund Investment panel have stated that their main or only duty is a fiduciary duty to maximise returns. However, this legal opinion makes it clear that local authority pension funds can also give regard to wider considerations when deciding what it does and does not invest in.

Divesting from tobacco companies, as far as I can see, is now up to political will, as there is clearly legal space to do it, as long as alternative investments are found which deliver the same or better long-term investments, which could be done. Already, other local authority Pension Funds have begun to divest from tobacco investments. See, for example, this article (4) which outlines how “Croydon Council has withdrawn all tobacco investments from its pension fund” and that “Suffolk County Council has also voted to disinvest from ‘every organisation that derives more than 50 per cent of its income from tobacco’”. The article then goes on to mention the Local Government Declaration on Tobacco Control, and that “54 upper-tier councils have now joined, along with 17 district councils.”

Could you please let me know if East Sussex County Council have joined the Local Government Declaration on Tobacco Control?

Could you also please let me know, in as much detail as possible, why the ESCC Pension Fund is continuing to invest in tobacco companies?

As I stated in a previous email, the health impacts of tobacco are absolutely devastating, and it is hypocritical and unethical for the ESCC Pension Fund to invest in tobacco companies while councils and the NHS advocate for people to reduce or stop smoking.

Both Conservatives and Liberal Democrats alike realize that this is an issue, as this quite recent exchange in Parliament demonstrates (5):

“Simon Hughes (Bermondsey and Old Southwark, Liberal Democrat)

“In my borough of Southwark we have higher than average smoking rates, and the Cabinet member responsible for health has said that hundreds of people are dying early because they smoke. Can Ministers help me to persuade our Labour council that it is inconsistent to say “Don’t smoke” on the one hand and invest £2.6 million of pension funds in British American Tobacco on the other?

“Anna Soubry (Broxtowe, Conservative)

“That is a good point, but I have to say that I am not convinced that it is just a Labour-run council that might have chosen to invest their staff pensions in this way; I strongly suspect that all political parties are guilty of this. While this is, of course, a matter for local authorities, it is also the sort of great campaigning work that MPs can do with their local councillors. It is even more important that they do that, given that they now have this great responsibility for public health.”

Over the years there have also been Early Day Motions on this subject (6), as well as investigations by MPs, pushing for local authority pension funds to divest from tobacco. Many reports have been written on this subject, including an excellent one by ShareAction, which looks at the possibility of local authority pension funds divesting from tobacco companies (7).

The ESCC Pension Fund could build on all of this, divest from tobacco companies and look to invest in other positive investments which could provide similar returns.

Positive Investment

Rather than going over all of the arguments around positive investment in the previous emails, I will briefly focus on the potential for the ESCC Pension Fund to invest in community owned renewable energy projects. As I have previously pointed out, a good example of this is Lancashire county council’s pension fund investing £12m in the UK’s first community-owned solar development in South Oxfordshire. County Councillor David Westley, Chair of the Lancashire County Council Pension Fund, said of the investment:

“There’s been a lot of discussion about local authority pension funds investing in community infrastructure. I’m pleased that Lancashire has been able to put this into practice with this £12m investment. Our first responsibility is to secure the best returns for the people in our pension fund, but I think many will be interested to know that their pension investments are helping fund worthwhile and sustainable schemes such as this one.” (8) (9)

Clearly there is room for the ESCC Pension Fund to invest in similar projects.

Could you please let me know if there has been any work within the ESCC Pension Fund on looking at positive investments, which would return social and environmental benefits as well as purely financial returns?

Again, I hope that you can answer the questions that I have raised in this – and my previous – emails. If you can not directly answer my questions, I would also like to be informed about any complaints and/or appeal procedures which are open to me to get them answered.

Best,

Edward Jones

(1) See, for example, KLP, Norway’s largest manager of Pension Funds, divesting from its coal investments: http://gofossilfree.org/klp-divest-coal/ A multitude of other Pension Funds have already divested – or are considering divesting – from fossil fuel companies.

(2) See, also this report from Share Action, which looks at the financial implications of climate change to pension funds and the steps they can take in light of the risks and opportunities it presents: http://shareaction.org/greenlightreport

(3) The full legal opinion can be read here: http://www.lgpsboard.org/images/PDF/Publications/QCOpinionApril2014 Some interpretations of this legal opinion can be read here: http://www.pensionfundsonline.co.uk/content/pension-funds-insider/lgps-funds-receive-legal-advice-about-tobacco-divestment/1355 and http://shareaction.org/health-workers-set-challenge-pension-funds-over-tobacco-holdings

(4) ‘More councils rejecting tobacco investment’: http://ehn.cieh.org/news/article.aspx?id=12322

(5) Exchange in Parliament http://www.theyworkforyou.com/debates/?id=2013-06-11b.155.1&s=simon+hughes+pension+fund#g156.0

(6) See, for example, EDM 339 on this subject: “That this House notes with concern that English local authorities, which took over public health functions from the NHS in April, invest over £1.6 billion in tobacco firms such as British American Tobacco and Philip Morris through their pension funds; further notes that smoking causes more preventable deaths than anything else, nearly 80,000 in England during 2011; believes that these investments run counter to the duty given to each council to improve the health of people in its area under the Health and Social Care Act 2012; welcomes Public Health England’s call for councils to divest from tobacco as part of their commitments under the World Health Organisation’s Framework Convention on Tobacco Control; urges local authority pension fund managers to review their tobacco investments in light of ethical concerns and the high-risk nature of tobacco investments; calls on the Parliamentary Under-Secretary of State for Public Health to send a letter to each English council leader urging them to divest from tobacco firms; and further calls on the Government to bring forward legislation to prohibit public sector organisations from investing directly in tobacco companies, in order to meet the letter and spirit of the UK commitment to the Framework Convention on Tobacco Control.” http://www.parliament.uk/edm/2013-14/339

(7) Local authority pension funds and investments in the tobacco industry http://www.shareaction.org/sites/default/files/uploaded_files/press/ASHfinalbriefing.pdf

(8) News : Lancashire County Pension fund invests £12m in the world’s largest community-owned solar power station. http://www3.lancashire.gov.uk/corporate/news/press_releases/y/m/release.asp?id=201302&r=PR13/0065

(9) Westmill solar co-op gets £12m backing from Lancashire council pension fund http://blueandgreentomorrow.com/2013/02/08/westmill-solar-lancashire-pension-fund/

——————–

Email response from Marion Kelly

10/2/2015

Dear Mr Jones,

Thank you for your follow-up e-mail to the Pension Fund Investment Panel members on the East Sussex Pension Fund (ESPF) investments, where you reiterated your previous questions about the potential for the Pension Fund to divest non-ethical investment. The Investment Panel held their quarterly meeting on Tuesday 4 February 2015 and discussed your email during the meeting.

This meeting was the final meeting of the East Sussex Investment Panel, and the Panel resolved to carry this subject forward for discussion by the new Pension Committee and the Pension Board, which will be replacing the Investment Panel, in compliance with the Public Service Pensions Bill. This Bill makes it a mandatory requirement to establish a local Pension Board with responsibility for assisting the Scheme Manager (East Sussex County Council) in relation to securing compliance with the scheme regulations and other legislation relating to the governance and administration of the scheme.

The Pension Board will be in place by 1 April 2015, while members of the new Pension Committee will be nominated/confirmed, following the General Elections in early May, and I expect the new Committee to hold their first meetings in June 2015. I will ensure your points are on the new Pension Committee future agenda for deliberation.

Thank you for your interest in the East Sussex Pension Fund and for your kind cooperation.

Yours sincerely

Marion Kelly
Chief Finance Officer

Business Services Dept,
East Sussex County Council,
County Hall,
St Anne’s Crescent,
Lewes,
East Sussex,
BN7 1UE

Tel 01273 335078
Mobile 07557 541 802

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  1. Pingback: Latest response from Mo Hemsley, Acting Chief Finance Officer for East Sussex County Council, on ESCC Pension Fund | Reform the East Sussex County Council Pension Fund

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