The Mayor of London and the London Pension Fund Authority (LPFA) have agreed a strategy to “divest” assets worth around £10 billion from fossil fuel companies, DeSmog UK can reveal.

The agreement seemingly fulfills Mayor Sadiq Khan’s campaign promise to strip the fund “of its remaining investments in fossil-fuel industries”.

But campaigners have been quick to criticise the announcement, saying the pledge’s small print means it is unlikely to mean funds are actually removed from fossil fuel companies — the core aim of the divestment movement.

Campaigners are concerned other cities could follow suit, using London’s problematic criteria for divestment as a cover to continue investing in fossil fuels.

Policy Announcement

With Khan having won the race to City Hall, the mayor’s office and the LPFA told DeSmog UK they have now “agreed an investment policy which is consistent with the Mayor’s Investment Policy on divestment”, first announced at an unreported public board meeting in May.

But the agreement is full of loopholes and caveats that mean the fund will keep most of its fossil fuel investments, and could even invest in new ones, according to campaign group Divest London.

Confirming the announcement, which encompasses all Greater London Authority (GLA) members including Transport for London, the Metropolitan Police and the London Fire Brigade as well as the LPFA and City Hall, a spokesperson for the Mayor of London’s office told DeSmog UK:

“The LPFA’s policy statement makes clear that where LPFA’s fiduciary duty allows it will not consider new active investments in fossil fuel companies directly engaged in the extraction of coal, oil and natural gas as sources of energy which are ignoring the risks of climate change.

“Further, the LPFA’s policy statement also states that all reasonable efforts will be made to divest where opportunities for engagement and reform of the company or project are not possible or do not exist provided that this will result in no material financial detriment to the Fund.”

That the combined total of the funds is just under £10 billion “demonstrates the Mayor’s commitment to fighting climate change”, they said.

Ben Caldecott, Director of the Sustainable Finance Programme at the University of Oxford, said the announcement represented “a comprehensive and forward looking strategy”.

But he said “there will also need to be transparent and accountable reporting of how the fund is implementing this strategy.”   

“The key will be in the detail and ensuring effective implementation over the longer term.”

Campaigners, however, criticised the policy for failing to be sufficiently stringent to be considered a divestment.

The wording of the statement makes it “a horrendous example” of a divestment pledge, Divest London campaigner Leila Mimmack, told DeSmog UK. “It doesn’t exclude anybody”.

In a letter to mayor Sadiq Khan and LPFA chair Sir Merrick Cockell, seen by DeSmog UK, Divest London wrote, “the investment policy is inconsistent with both the spirit and the letter of Sadiq Khan’s manifesto”.

Divest London has called for the policy to be retracted and amended. Instead, it wants London to follow a model set by cities such as Stockholm and Copenhagen, which last year agreed to sell stocks and bonds held in coal, oil and gas companies.

Caveats

The problem lies in the policy’s wording, which appears to give London’s funds carte blanche to keep their current fossil fuel investments and potentially even make new investments into oil, gas and coal companies.

The pledge states that the organisations will “not consider new active investments”. That means they can keep their old investments in fossil fuels.

The clause means the policy is “100 percent” not a divestment pledge, Mimmack said.

It also means the funds can continue to hold so-called passive investments, which are selected by a broker rather than the fund itself, that can still end up with cash going to projects such as the Dakota Access and Kinder Morgan pipelines.

Major UK companies including HSBC, Barclays and Aviva hold such assets, though It’s unclear whether the GLA or LPFA invest in similar funds.

The Mayor of London’s divestment statement goes on to say that the organisations will not consider investments in energy companies “which are ignoring the risks of climate change”.

But almost all major energy companies have a climate change policy of some sort, however weak — which potentially means the companies could be considered not to be “ignoring” the issue and can therefore still receive investments.

The Mayor’s announcement also adds the caveat that a divestment could be made only if “engagement and reform of the company or project are not possible”.

But as recent decisions at Shell and Exxon’s annual general meetings showed, activist shareholders are increasingly managing to push emissions targets and reporting obligations onto big oil companies — potentially exempting such companies from the divestment pledge.

Such details mean the Mayor of London’s promise is “still not enough”, according to Mimmack.  

“This could have been a trailblazing symbol,” Mimmack said, but instead it’s a “missed opportunity for London to be out ahead”.

As it stands, people could legitimately ask, “is it just another greenwashing tactic?”

Main image credit: Maciek Lulko via Flickr CC BY 2.0