Home > News > Risk > UK MPs Call for Parliament’s Pension Fund to Divest Fossil Fuels

RiskMay 30, 2019

UK MPs Call for Parliament’s Pension Fund to Divest Fossil Fuels

Lawmakers demand fund dumps BP, Royal Dutch Shell holdings.

More than 250 current and former members of the UK’s Parliament are calling for their pension fund, the Parliamentary Contributory Pension Fund (PCPF), to disclose its carbon-intensive investment, and to quickly phase out fossil fuel investments.

“We believe members of Parliament have a responsibility to act on climate change, and a unique opportunity to show leadership on climate action, responsible investment and the management of climate risk through addressing the practices of our own pension fund,” said the MPs in a signed pledge. “We call on the trustees to uphold their fiduciary duty and take the financial risks of climate change seriously.”

The MPs say they want the PCPF to quantify, disclose, and review the fund’s investments in carbon-intensive industries, engage in a dialogue with fund members and managers on responsible investment, and commit to phasing out fossil fuel investments over an appropriate timeframe.

“It’s time MPs joined the majority of UK universities, numerous faith groups and a growing number of local authorities,” Caroline Lucas, MP for Brighton Pavilion, said in a statement. “The climate emergency demands that all pension funds divest from fossil fuels and invest in positive solutions to the climate crisis.”

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According to the PCPF’s own statement of investment principles, the fund’s investment managers are expected to take account of environmental, social, and governance (ESG)-related risks and issues as part of their investment analysis and decision-making process. They are also expected to incorporate reporting on ESG-related issues into their regular reporting, which includes information on voting and engagement, in addition to details on how they are assessing and managing ESG-related risks in relation to their respective mandates.

“The trustees take responsible investment factors into account when monitoring and selecting investment managers,” the fund says in the “responsible investment” portion of its statement of investment principles. “The trustees aim to be aware of, and monitor, financially material ESG-related risks and issues through its investment managers.”

It also said the fund and all of its investment managers are signatories to the Financial Reporting Council’s UK Stewardship Code, and the UN Principles of Responsible Investment.

Based on the pension’s most recent annual report from June 2018, the plan had total assets of £730 million ($925.1 million), and its largest equity holding is in oil and gas company BP, which made up 1.6% of the portfolio, or approximately £11.7 million. It also has 0.8%, or £5.8 million, in Royal Dutch Shell A shares, and 0.7%, or £5.1 million, in Royal Dutch Shell B shares.

Although the fund doesn’t discuss divestment in its statement of investment principles, it does say that the trustees encourage engagement by its investment managers with companies on ESG issues “to positively influence company behavior and enhance shareholder value.”

Harvard Activists Call for Fossil Fuel Divestment

Tags: Divestment, ESG, Fossil Fuels, Parliament, PCPF, Pension, UK

Home > News > Newsmakers > Bridgewater Tells Arizona Pension Fund China Will Be No. 1 Economy in 10 Years

Newsmakers May 30, 2019

Bridgewater Tells Arizona Pension Fund China Will Be No. 1 Economy in 10 Years

Ray Dalio’s head of China research says trade war is broadly about a power shift.

By Chris Butera

At the Arizona Public Safety Personnel Retirement Trust’s Wednesday board meeting, Paul Podolsky of Bridgewater Associates told pension officials why China is still the place to be for investors.

Podolsky, head of China research and a senior portfolio strategist at the world’s largest hedge fund, works for a guy who is a longtime China investor. Ray Dalio made some news Wednesday by warning China not to follow up on restricting shipments of rare earths to the US because it would lead to a protracted trade war.

Podolsky told the $10.3 billion plan’s officials that there are currently three questions on an investor’s mind: Why China now? Why add Chinese assets to your portfolio? How is a China investment a market beater?

On the first question, Podolsky said the emerging market nation, now the world’s second-largest economy, is on its way to becoming the largest.

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“Even though they’re enormous…it’s likely soon that they’re going to be the biggest economy in the world,” he said, specifically in about 10 years. He said this is because of the country’s decision to open up its markets to outsiders. “This is the equivalent of Western Europe opening up,” he said, meaning that when a once closed-off nation makes its markets liquid, the financial world changes.

On the second question, Podolsky said now is a good time for an institution to get involved in China, not just because it’s a great portfolio diversifier, but because Chinese assets are not correlated closely to others. If you’re going to make your way to China, he said to make sure you know where in the country you’re putting your money.

On the third question, he said if an institutional investor wants to use China to beat its benchmark, it really should lever up on China to maximize its return. If it didn’t, then there’s no harm in sticking to tracking the index.

Officials at the pension fund then asked for the Ray Dalio employee’s take on the increasing trade tensions between President Trump and Xi Jinping, to which Podolsky replied that they don’t really bother Bridgewater.

“It’s true that we’re definitely in a trade conflict with China,” Podolsky said before reasserting his bullish stance. “The big picture, though, I’d say is even notwithstanding the trade war, it doesn’t really change from an investment perspective what I think about China’s assets.”

Podolsky said the trade war is narrowly about market access and the protection of intellectual properties. Broadly, however, he said it’s about a wealth shift, which the world has seen throughout history. “If you look back further through time, China was one of the dominant powers,” he said.

The Arizona pension plan is a nine-year client of the $160 billion Bridgewater, according to Mark Steed, its chief investment officer.

Tags: Arizona Public Safety Personnel Retirement Trust, Board Meeting, Bridgewater Associates, China, Pension, Trade War

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