The Long Read: To divest or not to divest, that is the question

Amazon, Facebook, Taylor Wimpey, BAE Systems, Royal Dutch Shell and Rio Tinto are just some of the companies the £6 billion pound Kent Pension Fund (KPF), administered by Kent County Council’s (KCC) Superannuation Fund Committee invest in. (The full spreadsheet of investments is available at the end of this blog post.)

The KPF “cannot and will not take up positions on ethical issues” about where and with whom it will invest its pension fund money, as they have a “fiduciary duty“, to maximise the returns for their 132,000 members and 360 employers who invest into the fund.

KPF have a £100 million pound investment in Royal Dutch Shell. This year Shell have, amongst others, cited divestment as a material risk to its business. However in the late 80’s Shell knew their products were contributing to Climate Change.

Investment by KPF into Shell have risen from £29 million (2015) to £50 million (2016), £67 million (2017) and £100 million in 2018.

So KPF’s £100 million pound investment into Shell is directly contributing to climate change. KCC and KPF believe their fiduciary duty to members and employers tops the fact they are aiding and abetting the destruction of our global climate. The irony here is that KCC holds a contradictory position as it has whole polices and plans to reduce climate change. And in yet another twist irony KCC do not mention once the word Climate Change it its latest environmental policy.

But Shell are not the only fossil fuel and extraction company KPF invest into. They invest into Petrobras, Centrica Rio Tinto and BHP Billiton all who have at sometime or other in recent years being mired in corruption and/or bribery scandals and contribute towards climate change via their respective industries.

In total KPF’s fossil fuel investments are a little over £200 million pounds. Yet in the last few days The Guardian announced  “funds committed to fossil fuel divestment now total more than $6tn (£4.6tn), with almost 1,000 institutional investors having made the pledge, according to a new report.” the article goes onto say “The sell-off of coal, oil and gas investments is led by the insurance industry, with $3tn of funds. But it also now includes the first nation to divest, Ireland, major cities including New York and key medical organisations. Major oil companies such as Shell have this year cited divestment as a material risk to its business.” So we ask why can’t KPF divest too?

In a comment from KCC Cllr Martin Whybrow (Green) who has long campaigned for divestment from fossil fuels for both the Kent pension fund and KCC’s own direct investments”  has said  “Councils, public investors (including Norway’s £750 billion pension fund, considered the world’s largest sovereign wealth fund), private investors, charities and NGOs, churches, educational institutions, the UK’s Environment Agency and ever more others are committing to divestment and it is long overdue that KCC did the same.”

Cllr Whybrow’s (pictured above) call for divestment from Fossil fuels has been heeded by six local authority pension funds who have committed to cut their fossil fuel investments: the Environment Agency Pension Fund, Haringey, Hackney, Waltham Forest, Southwark and South Yorkshire. Divestment is a practical, legal and responsible way for pension funds to respond to climate change by making an example of the climate change’s worst offenders: fossil fuels companies.

However, in response a spokesman for KCC has said  “All matters relating to the management of the fund are the responsibility of the Superannuation Fund Committee which has a responsibility to maximize investment returns for a given level of risk.We expect the external investment managers to invest in companies with good standards of corporate governance as well as producing the best investment returns.“

So in effect KPF members future financial wellbeing is in part based on investments proven to be bringing about human and environmental catastrophe.  And the way to stave off the end of the world is to continue investing, and by no means drop the fossil fuel investments altogether. It is a strange stance the KPF take.

All we would say is let the 132,000 members of the KPF vote on whether their pension fund should divest from fossil fuels as we are sure they would not want “stranded assets“. This in our mind would be the most democratic way forward.

But it’s not all about fossil fuels. KPF administered by KCC have a £50 million pound investment in tobacco, again contradicting its position it promotes on its website regarding smoking and tobacco. And according to literature published and supported by KCC there were 7,285 premature deaths in Kent related to smoking, and smoking is higher ii districts which ultimately are poorer.

KPF have too invested in BAE Systems (£17 million). BAE’s chairman has claimed his company’s weapons sales encourage peace. We personally wouldn’t agree with that as Sir Roger needs all the help he can get for his £700,000 annual salary, every bomb sold helps.

Also KPF have invested into Amazon (£50 million). Amazon has increased its UK activity from £1.45bn of sales in 2016 to £1.99bn of sales in 2017, with its profits increasing threefold from £24m to £72m. Yet its overall apparent tax charge was still a minuscule £1.7m.

Back in Feb 2016, it was rumoured that Amazon were to build a “fulfilment centre”, at Sevington, Ashford (Kent). However in a comment from Ashford Borough Council  Cllr Paul Bartlett for Weald East which covers Sevington said, “since the rumour has surfaced it has disappeared as fast as snow in springtime.” 

Critics often point to the fact that Amazon pays less in business rates on its UK properties than some traditional retail rivals. It’s important to note that Amazon isn’t breaking any laws here, but traditional high street retailers will no doubt be concerned about their ability to compete. A traditional shop with an expensive town centre will not be able to take advantage of complex international tax arrangements, and will not be able to shift its operations out of town without suffering.

KPF have a £20 million pound investment in Facebook. The company has been under investigation for allowing interference in British and foreign elections and referendums. The Digital, Culture, Media and Sport Committee headed up by Folkestone & Hythe MP Damian Collins (pictured below left) has set out a key list of recommendations and its final report is due out in the Autumn (2018) sometime.

Facebook like Amazon has come under sustained criticism for the lack of tax it pays in the UK. By paying less tax  it damages the UK as a whole. Of course Facebook like Amazon can and does take advantage of complex international tax arrangements, perfectly legally.  To some it feels like Facebook are still making a mockery of the UK tax system and their UK users by not paying their fair share of tax in this country, whilst their accounts, which they said would help us understand what they do in the UK, do nothing of the sort.

Both the media and Mr Collins has pointed the finger at Russia for election meddling. KPF have considerable investments in Russia and at a time when the Foreign Secretary Jeremy Hunt is urging further sanctions to be considered against Russia, is it wise those assets should remain there?

Finally KPF have investments of £60 million based in the Cayman Islands, “the most notorious tax haven on earth.”

All these companies have done nothing wrong and neither has the Kent Pension Fund. What we believe would be the right way forward on whether KPF should or should not divest from the above mentioned companies, is hold a vote. Allow all 132,000 members to decide if they wish to continue supporting companies which are contributing to climate change, and not contributing sufficiently to the UK tax base by utilising complex international tax arrangements. This to our minds would be the best way forward.

Kent Pension Fund Investments September 2018

Kent-Pension-Fund-Investments-feb-2017

If you see anything of interest in the spreadsheets, do let us know. shepwayvox [at] riseup [dot] net

The Shepwayvox Team – Dissent is NOT a Crime

Main Photograph: Sasko Lazarov/Photocall Ireland/Trócaire/350.org