US pension fund eyes selling oil holdings
A US pension fund with nearly $2bn in assets is considering selling its holdings in some of the world’s biggest oil and gas companies because of the threat posed by climate change.
In what investor advocacy groups say would be the first divestment of its kind, the Seattle City Employees’ Retirement System is to discuss on Thursday a request from Mike McGinn, the city’s mayor, to sell out of companies including ExxonMobil and Chevron.
The move is one of the most visible results so far of a campaign spearheaded by Bill McKibben, the US environmental activist, modelled on the 1980s disinvestment movement that pressed South Africa to dismantle its apartheid system of racial segregation.
Mr McKibben, founder of the 350.org climate campaign group, wants universities, governments and churches to divest from what he calls “outlaw companies,” whose coal, gas and oil cannot be safely burnt if the world is to avoid potentially dangerous global warming, according to climate scientists.
“These are no longer normal companies,” he said in an interview. “There is no flaw in their business plans. The flaw is their business plans.”
ExxonMobil said it was trying to reduce its greenhouse gas emissions while providing the world with the energy it needs. “We take the issue of climate change seriously and the risks warrant action,” a spokesman said.
If the Seattle retirement scheme were to divest from such companies completely, it would be the first to take such a step, said Stephanie Pfeifer of the Institutional Investors Group on Climate Change, which represents some of Europe’s largest pension funds and asset managers.
Mindy Lubber, president of the US-based Ceres investor advocacy group, agreed, saying the move underlined the mounting push for investors to acknowledge the long-term risk of investing in fossil fuel companies, as policies to curb climate change keep emerging.
“The divestment movement without question is re-raising the question of whether fossil fuel companies are the best investment and I think over time they’re not going to be,” she said.
However, Milton Catelin, chief executive of the World Coal Association, said the divestment campaign was “one-dimensional” and ignored the contribution affordable fuels such as coal made to economic development and poverty alleviation.
“The Intergovernmental Panel on Climate Change and the International Energy Agency both acknowledge that coal will continue to be burnt at scale for decades,” he said. “This campaign simply makes it that much harder to drive investments in cleaner fossil fuel technologies.”
The Seattle retirement system meeting arises from a November meeting Mr McKibben had with Mr McGinn, a former local leader of the Sierra Club environmental group.
Mr McGinn subsequently wrote to Seattle’s retirement system’s board, which he does not directly control, asking it to stop investing in fossil fuel companies in future and look at moving existing investments from such companies.
The mayor’s office said the system had $17.6m invested with ExxonMobil and Chevron late last year, or a little less than 1% of its $1.9bn in holdings.
Cecelia Carter, the retirement system’s executive director, said the group’s board of administration would address the issue of divestment at its investment committee meeting on Thursday.
The system’s investment policy says “investments will not be selected, rejected, or divested from based solely on geopolitical and social issues,” such as environmental matters, but “serious consideration” will be given to such issues to the extent that they “bear on the financial advisability of the investment.”
A spokesman for Mr McGinn said: “This will be a multiyear process and as we are the first city to undertake this work, it will be interesting to see how the work unfolds.”
The Seattle move comes after two small colleges in Maine and Massachusetts agreed to purge their portfolios of fossil fuel investments. Students at universities across the US have been pushing their administrations to back fossil fuel divestment, including those at Harvard, which has a $31bn endowment.
These concerns would be discussed with students this semester, a Harvard spokesman said on Tuesday. “But, as we have stated before, the university operates with a strong presumption against divestment,” he said.
Mr McKibben says the divestment campaign is likely to spread beyond the US, including in the UK, the source of some analysis behind the US movement, which emerged from a widely read Rolling Stone magazine article he wrote last July called, “Global Warming’s Terrifying New Math.”
The article used financial analysis by the London-based Carbon Tracker think-tank, which showed that much of the known reserves of fossil fuels can never be burnt if the world is to avoid potentially disastrous climate change.
That claim is based on the view of climate scientists that it is unsafe to allow average global temperatures to rise more than 2C above pre-industrial levels. Temperatures are already 0.8C higher.
That suggests only 565 gigatonnes of carbon dioxide – the main greenhouse gas – should be emitted between now and 2050.
However, the world’s proven coal, gas and oil reserves already come to nearly five times that amount, Carbon Tracker said.
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