10. Let’s Help the Funds

Gas Free Pensions

If you get a reply from you pension fund explaining in technical jargon that what you asked for is not tricky/not possible, you may refer to this excellent study written by financial experts from UK, Denmark and the Netherlands.

Managed Decline of Fossil Fuel Businesses – A Net Zero World is Fossil Free

The study can be found here for download

This paper is primarily aimed at investors who are considering divestment of companies which have fossil fuel extractive business units.

The aims of the paper are threefold:

  • To provide criteria to help investors to decide which coal, oil or gas companies should be divested from, or reinvested in

Common approaches to divestment are to exclude the entire oil and gas sector, or exclude any company with fossil fuel reserves. Some investors find these problematic because they do not acknowledge some companies may transition. This paper provides a more nuanced approach which allows investors to assess the extent to which individual fossil fuel companies can be considered to be transitioning or not, and therefore suitable for divestment or reinvestment. Investors can adopt a policy which states they will not invest in fossil fuel companies which fail to achieve the criteria.

  • To improve investor engagement strategies by using the criteria as the basis for engagement strategy

Investor engagement efforts to date have, with some important exceptions, tended to focus on asking companies to do specific actions at a particular time (e.g. disclose risks) or had asks which are too broad or subjective (e.g “align with the Paris Agreement”). This paper seeks to find an effective middle ground, with objective criteria that can form the goals of any engagement. If the companies are not achieving the criteria set out here by a certain date, investors can assess that the engagement is not successful, and that they should divest.

  • To improve the impact of divestment by providing clear asks of companies when investors divest

All the criteria to assess companies flow from the recognition that to address the climate crisis, we need an immediate managed decline of fossil fuel exploration and infrastructure.

This need for managed decline is currently not adequately communicated by investors, or indeed their advisors or advocacy groups. By making these asks more central to their divestment announcements, investors can help support the shift to managed decline. This approach also helps to make divestment a form of public engagement with the fossil fuel companies. We hope that as investors start to communicate the need for these actions from companies it will encourage policy makers to focus more on supply side policies and take more decisive action to change the business plans of companies not acting.

The criteria

  1. No lobbying for policies that reduce the probability of the 1.5°C goal.
  2. No exploration spending.
  3. No approval or acquisition of new fossil fuel infrastructure or projects.
  4. A clear plan for wind down of fossil fuel extraction.
  5. Remuneration policies that support managed decline of fossil fuel extraction.

The criteria build on the work of many others, including the Transition Pathway Initiative (TPI) the Oxford Martin Principles (OMP). This paper seeks to align with the OMP while providing more specific criteria to help operationalize the principles. And it seeks to fill a gap left by approaches such as the Transition Pathway Initiative whose authors’ acknowledge their methodology has limited ability to assess companies looking to winding down fossil fuel business units. We are pleased to acknowledge that the criteria in this paper are aligned to similar criteria developed by WWF.