Archive for the ‘Pensions’ Category

Article originally published in The Independent on 9 November 2014.

Councils paid to cut smoking, but have £2bn of tobacco shares

By Jan Goodey, Jennifer Kennedy, Cahal Milmo, Ed Jones

Local authority pension funds have nearly £2bn invested in the tobacco industry despite the county councils they represent being responsible for promoting public health, including anti-smoking campaigns, The Independent on Sunday can reveal.

Figures obtained under the Freedom of Information Act show for the first time the full extent to which the 99 regional pension funds, representing 4.6 million public sector workers, own shares in the tobacco giants that promote smoking around the globe.

Local authorities in England and Wales have holdings in cigarette producers worth £1.8bn, of which more than half – £953m – is invested in a single company, British American Tobacco.

BAT, which is one of the world’s largest tobacco companies and is based in London, is among the companies lobbying against the introduction of plain packaging for cigarettes in Britain as well as pushing sales in developing countries. It has recently set out a “harm reduction” strategy aimed at developing safer nicotine-based products such as e-cigarettes, although the vast majority of its earnings still come from selling normal cigarettes.

Campaigners and experts say the substantial holdings amount to “blood money investment” by local authorities and are unacceptable because of the transfer last year of responsibility for improving public health through promotions, including high-profile anti-smoking campaigns, to councils in England. This year, the Department of Health paid £2.79bn to local authorities for public health campaigns on subjects including smoking prevention and cessation, such as the “Stoptober” campaign.

According to the FoI figures, some eight in 10 of the regional pension funds have tobacco holdings, and just 10 funds are responsible for nearly half of the total – £822m worth of shares.

The tobacco shares are held as a mixture of direct investments by funds and indirect holdings through managed or pooled funds.

The largest investor is West Yorkshire, with shares worth £186m, followed by the London Borough of Barnet, with £116m. The five local authorities making up the West Yorkshire fund will receive £128m this year for public health promotions – representing more than two-thirds of the value of their tobacco investment – while Barnet will receive £14.3m.

John Middleton, the policy head at the Faculty of Public Health, said: “These amount to blood money investments. They are simply incompatible with the role local authorities now have in assuring the health of the populations they serve. There is a clear case for local authorities to disinvest from these funds or risk undermining their credibility.

“We have a situation where, if a local authority employee is a smoker, then they risk not seeing their pension through premature death. How can investing in a strong tobacco industry be in the best interests of those fund members?”

Campaigners said the figures should increase the pressure on council committees and trustees who oversee the pension funds to liquidate their tobacco holdings, on both ethical and investment grounds.

The number of smokers in England fell by 1.1 per cent last year to a historic low of 18.4 per cent of the population. At the same time, smoking remains the single largest cause of preventable illness and premature death in Britain, costing the NHS an estimated £2bn a year.

A global squeeze on tobacco sales following the introduction of anti-smoking legislation in key markets such as China and the effects of the economic slowdown have also hit the performance of some of the big so-called “sin stocks”.

Imperial Tobacco, the second largest recipient of local authority investments, last year announced its first fall in profits in 17 years; while, in October, BAT, whose brands include Lucky Strike and Dunhill, revealed that it had sold 495 billion cigarettes in the first nine months of 2014 – a 1 per cent fall year on year. Both companies insist their overall financial performance remains strong.

Stewart Brock, of the Tobacco Free Pensions campaign, said: “Tobacco has seriously underperformed the market in the past year or so, when it has previously always done well in recessions. Tobacco volumes are falling worldwide. The economic case for divestment is getting stronger.”

Pension funds say they have a legal or fiduciary obligation to “maximise financial return” and cannot give consideration to ethical issues. But new regulations for the Local Government Pension Scheme, the umbrella body for the 99 council funds, allow local authorities to take into account the “public health implications” of their investments, opening the way for divestment.

This summer, Croydon Borough Council became the latest of a small number of local authorities to declare that its pension holdings would become tobacco free and placed instead with an ethical fund, following the example of two other London authorities, Newham and Brent. Suffolk County Council has asked its pension trustees to take similar steps.

Simon Hall, Croydon’s cabinet member for finance, said: “The council will be getting a better investment deal, as ethical funds are performing favourably against other schemes. Tobacco is not the low-risk, high-profit investment it once was.”

The tobacco companies insist the sector’s financial performance remains robust. In a statement, the Tobacco Manufacturers’ Association said: “Tobacco is a legitimate industry and people are free to choose to invest in tobacco stocks. Fund managers should be free to make the best financial decisions for their investors.”

Deborah Arnott, the chief executive of the health charity ASH, said: “Councils have a legal duty to get the best deal for their pensioners and taxpayers, and another legal duty to promote the health of local people, so we recommend they take legal advice on this tricky issue.”


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Article originally published on 27 April 2014 in The Independent.

Local authorities have ‘conflict of interest’ on fracking investments

By Jan Goodey, Cahal Milmo, Will Cottrell and Ed Jones

Councils that will play a key role in deciding the future of fracking in Britain have investments worth millions of pounds in companies behind the energy extraction method, The Independent can reveal.

Local authorities in areas identified as potential sources of gas have holdings via their pension funds in firms seeking to drill within their boundaries. One of the most significant investments is £1.9m held by Lincolnshire County Council’s pension fund in Total, the French company that earlier this year became the first oil major to enter Britain’s dash for shale gas, with a £30m stake in two exploration projects in the county.

West Sussex County Council also has indirect holdings in Cuadrilla, which was at the centre of controversial tests in the village of Balcombe last summer. The council also has substantial investments, currently worth £3.5m, in Centrica, the parent company of British Gas – which last year took a 25 per cent stake in a Lancashire shale-gas project operated by Cuadrilla, albeit not directly.

The Greater Manchester Pension Fund (GMPF), which invests on behalf of Salford and Trafford councils,  holds shares in Henderson Group, a major investor in IGas, another fracking exploration company that is conducting shale-gas tests in the Salford area.

All the councils insisted there was no conflict of interest between their pension-fund investments and past or future planning decisions on fracking projects. They pointed out that shares had been bought in all cases except Lincolnshire via investment funds,  and councillors involved with pension fund-related decisions did not sit on their planning committees.

But campaigners said it sent the wrong signal and called on the local authorities to sell their holdings.

Simon Clydesdale, energy campaigner for Greenpeace UK, said: “It’s a worrying discovery. Fracking is already a dirty enough industry without getting mired in the murky waters of conflicts of interest. Councils must disinvest and show local voters that they can be trusted to put the interests of their constituents first when making crucial decisions on fracking applications.”

With assets worth about £120bn, local authority pension funds are among Britain’s largest investors.

David Forbes, Lincolnshire’s assistant director of resources, said: “The pension scheme operates within a set of clear investment principles and is overseen by the pension committee, which makes its decisions independently from the county council.”

West Sussex County Council said its investment in Cuadrilla, worth some £26,000, was minimal and equated to some 0.001 per cent of the total value of its £2.45bn pension fund. In a statement, the council said: “Any indirect investments made by the pension fund’s investment managers would not have any influence at all in determining a planning application.”

Salford City Council said its planning panel members had no role in deciding where GMPF invested its funds. GMPF acknowledged its holding in Henderson Group but said it had no investment, direct or indirect, in IGas.

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This article was originally published on 24th February 2014 in The Ecologist

Special Investigation Planners’ pension funds set to win from fracking permissions
Jan Goodey, Will Cottrell & Ed Jones

Two Councils at the front line of fracking protests – Greater Manchester and West Sussex – have pension funds investing in the major fracking operators – while decisions on planning applications to frack are pending.

The findings – which have emerged from a special investigation for The Ecologist – reveal a serious conflict of interest as the value of planners’ pensions could be affected by the decisions they are making.

West Sussex County Council Pension Fund (WSCCPF) invests in IGas, Celtique Energie – and Cuadrilla, which made the news headlines in the summer at Balcombe.

Greater Manchester Pension Fund (GMPF) has the same interests in the big three with IGas currently facing protesters at Barton Moss near Salford.

The spreading tentacles

Lawrence Carter, energy campaigner at Greenpeace UK said: “After the business rate bribes promised by the government, it now turns out that councils have their pension pots riding on the outcome of fracking applications. These councils appear to have a worryingly large stake in the success of the UK’s fracking industry.

“Fracking is a highly controversial issue and council authorities owe it to their citizens to ensure that they are far beyond even the slightest suspicion of a conflict of interest. Local councils are institutions trusted by the vast majority of the population – they need to do all they can to retain that trust.”

In Balcombe, Cuadrilla is waiting on planning permission from West Sussex County Council to continue its controversial work from last summer with a series of flow tests to assess the viability of fracking.

WSCCPF invests in the US firm to the tune of £3.8m through its UK partner, Centrica. It has also invested in IGas, which has a licence block covering the West Sussex town of Storrington.

This investment is via IGas shareholder Ballie Gifford, a fund manager for WSCCPF. The firm is the recipient of the largest WSCCPF investment – £187m – an undisclosed proportion of which is invested in IGas.

Celtique Energie is looking to frack in nearby Fernhurst, Billingshurst and Wisborough Green. It too is a potential money-spinner for the Council, although to a lesser extent: WSCCPF has fracking investments through two portfolio funds, Partners Group and Pantheon Global Secondary Fund (under £5,000 in each).

‘No conflict of interest’, insists West Sussex

A West Sussex County Council spokesman told The Ecologist: “There is not a conflict of interest. Bailie Gifford has a discretionary mandate and make investments to fulfil the obligations on the pension fund. Whether or not we hold any stocks in our pension fund will not alter any planning decision that we do or do not take.”

The West Sussex Pension Fund, worth some £2.45 billion, is one of the larger local authority pension funds in England and Wales.

As well as the County Council it takes in the University of Chichester, Chichester College, Central Sussex College, several district councils in the area and more than a dozen town and parish councils – plus local housing associations and public and voluntary sector organisations.

The fund invests in a number of other controversial companies in arms and tobacco. It holds shares worth £8.5m in British American Tobacco and £4.5m in BAE Systems.

Manchester Councils – heavily committed

Further north, Salford and Trafford Councils, which have granted permission for IGas to drill at Barton Moss and Davyhulme, have investments through the GMPF, with £108m in the Henderson Group which through a subsidiary, is a major shareholder in IGas.

GMPF also has holdings totalling £73m in Cuadrilla via partner, Centrica and £10m in Pantheon Global Security Fund IV and £1.9m in Partners Group, both portfolio funds which invest in Celtique Energie.

While the permit IGas holds in Barton Moss is for coal bed methane exploration, the company has stated that it is also considering shale gas extraction by fracking in the future.

No conflict of interest that we’re aware of …

A Salford Council spokesperson told The Ecologist: “Planning permission for coal-bed methane exploration drilling was given in 2010, when the city’s Planning Panel considered all the issues carefully, heard a great deal of evidence, and granted permission for the exploration to take place.

“Councillors who took the decision to grant planning permission to I Gas in 2010 for coal-bed methane exploration were not made aware of GMPF’s investments in Henderson Global Investors. There is no conflict of interest that we’re aware of.

“The members of Planning Panel have no role in deciding where GMPF invests its funds and had no role in deciding that GMPF should invest its funds in Henderson Global Investors.

“Should the company or anyone else wish in the future to engage in anything further than they have been given permission for, they would have to seek separate planning permission from the Council. They would also require permits from both the Health and Safety Executive and the Environment Agency, which are the regulatory authorities for these issues.”

Conflicted responsibilities?

The Ecologist has looked into the possible conflict of interest should councillors work both in planning and pension fund management. On its website WSCC Pensions Panel states that it

“wishes to be an active shareholder and exercise its voting rights to promote and support good corporate governance principles, which in turn will feed through into good performance.

“The Pensions Panel has directed the fund managers, in acting in the best financial interests of the scheme, to consider, amongst other factors, the effects of social, environmental and ethical issues of the performance of a company when considering the acquisition, retention or realisation of investments for the scheme.”

While there is no direct crossover between planning and pensions, in West Sussex, Conservative Councillor Steve Waight is on both the Pensions Panel, and the Performance and Finance Select Committee.

Two others – Conservative Cllr Liz Kitchen and Lib Dem Robin Rogers – sit on the same Finance Committee as well as on the Planning Committee.

Trafford Council’s Conservative Cllr Alan Mitchell is on the GMPF Pension Panel and at the same time is on the Executive Committee in charge of Highways and Environment. The Executive is responsible for all key decisions and the strategic management of services.

In nearby Salford, Labour Cllr Bernard Pennington is also on the GMPF Pension Panel and at the same a member of the Finance and Budget Scrutiny Committee.

Local MPs: ‘no comment’

Barbara Keeley, MP for Worsley and Eccles South (which covers Barton Moss), said she could not comment on the WSCCPF as it was not in her remit. When questioned about the wisdom of investment in extreme extraction over and above renewables she made no comment.

The Ecologist also approached Andrew Tyrie MP for Chichester in West Sussex who also did not comment.

This investigation follows a broader picture of local council investment in tobacco and arms companies at a time when NHS resources are stretched and Middle Eastern military repression continues apace.

‘We will not be bought off!’

Meanwhile closer to home other local councillors have rejected government plans to allow councils to keep 100% of business rates from fracking operations, rather than 50% as before.

In Hampshire, the Conservative leader of the county council, Roy Perry told the Portsmouth News that “the Council will not be ‘bought off’ by David Cameron’s offer of extra revenue if it approves applications for fracking.”

On a broader scale some pension funds are already pulling money out of fossil fuels, fearful of owning ‘stranded carbon’ assets. Nearly $2bn has been pulled out of fossil fuel shares with 17 of the world’s largest funds saying that they would reinvest their money in clean energy.

The Green Light Campaign has been set up specifically to encourage pension funds to pull out of the fossil fuel business altogether.

Lancashire – investing in renewables

This comes in the light of a number of leading scientists including Sir David King, the Foreign Office Special Representative on Climate Change, warning that fracking would have “enormous environmental consequences”.

In a positive example of what can be done, just down the road from Barton Moss, Lancashire County Pension fund has recently invested £12m in the world’s largest community-owned solar power station, Westmill Solar Cooperative in Oxfordshire.

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