Divest from fossil fuels: Reinvest in a just transition
Mika Minio-Paluello, Walthamstow CLP and Labour Energy Forum, explores how Labour councils can democratise pension wealth and build an economy beyond neoliberalism and fossil fuels
UK LOCAL COUNCIL PENSIONS hold £14 billion of shares in oil, gas and coal multinationals that are trashing the planet, dodging taxes and persecuting trade unionists.
The most heavily exposed are Labour-run councils in Greater Manchester, Merseyside, West Yorkshire, and the London boroughs of Merton and Camden. Greater Manchester Pension Fund has £1.3 billion invested in fossil fuels – almost 10% of its total pension pot.
Public sector workers who battled winter floods that battered Manchester and Yorkshire are discovering that their own pensions are accelerating climate change. These investments also funnel capital out of local lives and economies into corporate profits for BP and Shell – neoliberalism extracting wealth from Britain’s regions.
It is not a sensible investment strategy to make 4.6 million public sector pensions dependent on long term profits from an industry that threatens the very safety of our planet. Reaching the Paris target of 2 degrees warming means leaving 80% of fossil fuels in the ground. Eventually, shares in oil, gas and coal will become worthless. The existing coal crash – coal is in terminal decline according to Goldman Sachs – saw UK council pensions lose £683 million in just 18 months. Greater Manchester’s pension pot alone probably shrunk by over £100 million because of coal.
Public sector workers’ pensions will be better protected by divesting funds from fossil fuels. Labour-run councils can take the initiative and reclaim pension funds from Tory-supporting City advisors. Committing to divest means selling off fossil fuels holdings over a five year period.
Local authority pension funds could be reinvested to build new council housing, community-controlled renewable energy and public transport – creating local jobs, improving services, and ensuring safer pensions.
Pensions can be harnessed to drive the energy transition and support local innovation, retain value in communities while establishing new public ownership models. The long term nature of pension investments allows for the support of infrastructure essential in reducing inequality, like Nottingham’s new Robin Hood Energy, or Switched on London’s demand for a London- wide municipal company offering cleaner and cheaper energy.
The £14 billion currently invested in fossil fuels could instead be used to build over 200,000 energy efficient homes, or to install solar that could create more electricity than Scotland consumes. This isn’t ‘pie in the sky’ thinking. The borough of Islington’s pension fund is investing £150 million into social housing, while Lancashire invested millions into an energy co-operative.
To win elections, Labour needs to be not only anti-austerity, but also pro something else – articulating a vision for a tangibly better society. Fossil fuel divestment is an opportunity to create jobs, boost local economies and democratise wealth. It also reshapes the reality that we think is possible, by subjecting the elite arena of investment to democratic and social forces.
Labour has been slow to join the fossil fuel divestment movement, despite supportive statements by Barry Gardiner, Clive Lewis and Sadiq Khan. In November, 50 Labour-run cities pledged to run on clean energy by 2050. They should also make a commitment to end fossil fuel investments.
The Tories fear democratic in influence over capital – hence Osborne is trying to restrict freedoms by banning investment boycotts, and to merge pension funds into larger and less accountable entities. By moving money out of fossil fuel multinationals and prioritising other more productive parts of the economy, we can break the grip the City holds over the rest of Britain, and create the basis for a new financial architecture, dedicated to economic and energy democracy. This will leave pension holders, the climate and public services better off.
Labour local authorities in the UK led the way on divesting from apartheid in the 1980s. They can do so again to challenge the racism of climate change, to build a society beyond fossil fuels and neoliberalism. We can start today, where Labour is in government, whether in Hackney, Camden, or Manchester.
Local authority pension boards are mostly composed of councillor and trade union reps. Trade union branches, Labour Parties at ward and council level, and councils can pass motions backing Divest-Reinvest, calling on their representatives and pension boards to take action. Model motions are available on Labour Energy Forum’s website. We can also arrange speakers for meetings debating motions.