UK's Largest Pension Fund to Sell Out of Coal, Tobacco and Weapons -- Financial News
June 01 2020 - 10:02AM
Dow Jones News
By Mark Cobley
Of Financial News
The U.K.'s biggest pension fund is to sell out of tobacco, coal
stocks and investments in controversial armaments, joining an
increasingly widespread movement among the world's top investors to
abandon industries judged to be unsustainable in the long term.
The Universities Superannuation Scheme, which manages 68 billion
pounds ($83.9 billion) in retirement savings for 400,000 academics,
announced its first-ever "exclusions"--the ruling-out of certain
investments--in a statement Monday. Simon Pilcher, its chief
investment officer, said: "This is a major development for us, and
one that will balance both keeping the financial promises made to
[our members] with investing in a responsible way."
It will begin with the sale of around GBP180 million in tobacco
stocks, Mr. Pilcher said, comprising its holdings in three
companies--British American Tobacco PLC, Imperial Brands PLC and
Altria Group Inc. While the policy also covers bondholdings, USS
doesn't presently own any debt in these companies, he added.
USS also currently holds no pure-play coal miners, nor
investments in companies involved in the production of cluster
munitions, landmines or white phosphorus--a chemical weapon. The
pension scheme will pledge never to buy into these areas in the
future, and will also commit not to buy into energy companies that
derive more than 25% of their revenues from thermal coal.
USS's divestment move follows a review of its portfolio begun at
the end of last year, which concluded that "changing political...
attitudes and increased regulation" are likely to "damage the
prospects of businesses involved in these sectors in the years to
come."
Mr. Pilcher stressed the review didn't amount to an ethical
judgment on the businesses concerned. He said: "We are required to
make our decisions based on financial factors, but our conviction
is that the longer your time horizon, the more certain it is that
ethical issues will 'bite'. If a company is social dumping, for
example, because it is exploiting child labour in a far-flung
country, then at some point there will be an 'aha' moment and
consumers will turn against them."
He concluded: "We think these companies will have lower returns
in the future. That is the reason for this decision."
USS promised it would sell out of all holdings in these
industries within two years, though it expects to complete most of
the divestments much earlier.
The move is a departure for USS, which has resisted calls to
sell out of stocks on non-financial grounds in the past, and has
never publicly announced its exit from entire industries. Campaign
groups welcomed the decision, but said it should have come
earlier.
Catherine Howarth, chief executive of ShareAction, said: "After
many years of USS closing its ears to members' views on the
scheme's investments, it seems new leadership at USS is once again
listening. This will greatly help to restore trust in USS at a time
when it is badly damaged. There is much further to go with this
process, and we hope USS will look now to follow other large U.K.
schemes in establishing a robust new approach to regularly
ascertain the views of members on investments held for their
benefit, building members' preferences into the scheme's
stewardship policy as well as taking further, bold steps to halt
investment in fossil fuels."
Professor Paul Kinnersley and Dr Sue Blackwell, members of
Ethics for USS, recently met with USS and said: "We believe that
the overwhelming majority of USS members will support this decision
as they do not want their pension contributions invested in sectors
which accelerate climate change, kill people or cause harm to
them."
Website: www.fnlondon.com
(END) Dow Jones Newswires
June 01, 2020 09:47 ET (13:47 GMT)
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