LOCAL GOVERNMENT PENSION SCHEME
"Responsibly Investing" in companies that
Pension Divest
Pensions funds with values in the billions are understandably constrained by legal regulations. At Pension Divest we want to help concerned pension scheme members, willing pension fund committee members and divestment campaigners, to better understand the legal framework which govern LGPS ethical investment factoring. We try to show how within the law it is not only possible, but more legally consistent for funds to divest from immoral sources of revenue.
"UVision Hero-30" by Reise Reise, licensed under CC BY-SA 4.0
Does a "Responsible Investor" invest in...
- General Dynamics: Makes MK-84 2,000lb bombs
- Palantir: Artificial intelligence weapons targeting
- Rheinmetall: Israel's tank ammunition
- Thales: Russian tank's night vision systems
- Caterpillar: Israel's military bulldozers
- Northrop Grumman: Land mine dispensing vehicles
- Safran: Russia's fighter jet GPS systems
- Renk: Israel's Merkava tank gearboxes
- Boeing: Attack helicopters & bombs
- BAe Systems: Israel's F-35 parts
These are just a few examples of companies in which LGPS schemes are investing your money, with no more regard than if they made baby food.
Pension scheme members are shocked to learn that their pension pot is invested in this type of company. That shock alone could be proof of an ongoing deception.
The Brunel Pension Partnership state on their website front page "Forging better futures by investing for a world worth living in" but they make no mention that they are investing 10s of millions in the developers of killer AI technology, companies that prepared Putin's military for their invasion of Ukraine and those who continue to supply weapons to Netanyahu; both leaders accused of genocide and wanted for war crimes. Could a reasonable person think that public sector workers, who have spent their working lives putting people before profit, would find this use of their earnings "Responsible Investing"?
Pool companies manage 72% of the LGPS funds
Local council pension schemes
Million pension scheme members
BILLION Pounds Total across England, Scotland & Wales
Know your pool company
Much of the investing of your money has been delegated to companies with very little control or oversight by your council fund administrators. These are professional money people, the cutting edge of capitalism
Actions for scheme members
Grass roots campaigning is required to bring change but we know not everyone has time to campaign individually. A function of Pension Divest is to advocate for divestment on behalf of scheme members. It couldn't be easier to add to the campaign on this issue, just enter your name below and tell us which fund you are in. By joining together, we will have strength in numbers and much more chance of success.
Asking for arms divestment does not affect your pension payout; the LGPS is a Defined Benefit scheme meaning the payout is at a fixed amount. The money released by divestment will be invested in regular companies instead, with similar returns, so there is no risk of any significant detriment to the fund as a whole.
Contact your scheme directly
Whether you have joined the campaign or not, you can make a really big difference by sending a short individual email to the local council administrators. Not many people do it, so each email makes a big impact, more so if it is your own words rather than a pre-formated email. It is though, from the legal perspective, important that these three points are made. In your own words tell them -
- My pension is with this scheme.
- I do NOT want my pension invested in weapons manufacturers or companies complicit in human rights abuse.
- I do NOT want my pension scheme to put profit before people.
You can easily find the contact details for your fund on the LGPS Member website it would be ideal if you BCC pensiondivest@pm.me so we can get an idea of which funds are being challenged and which ones to focus on. But of course thats entirely optional.
After you have done that please share a link to this website with your friends and colleagues.
Information for campaigners & committee members
The barrier to divestment in most cases is not the pension fund committee members but the council officers, who are frequently seen misleading committee members and campaigners alike, with incomplete and even false information.
Whether you are on a committee or a concerned campaigner it is essential to understand the legal situation. A detailed explanation can be found in this PDF document Devon Council LG Pension Weapons Investments You will find our summary of the law as it stands (significant effort has been made to confirm accuracy but we stress you should satisfy yourself before taking any action), and common rebuttals scheme members receive back when requesting pension funds to 'walk their talk' on being responsible investors. If your fund comes back with something original, please let us know so we can add to the document.
The document is focused on the example of the Devon Pension Fund but you will likely find many of the same companies are invested by your fund and the bulk of the document will apply to all LGPS funds and in fact most private pension funds and charity investments.
Please share the document with councillors at your local fund even though their investments are not exactly the same.
Key Findings
- It is perfectly legal for funds to divest: Many replies to requests to stop investing in weapons manufacturers are false claims that the fund's hands are legally tied and they have a fiduciary duty to make the absolute maximum profit regardless of all else. In fact it is explicit in law that they are allowed to take non-financial factors into consideration even when it might give less than the absolute maximum return.
- It is not a political request: It is very common for council officers to falsely claim that requesting divestment from arms manufacturers is a "political view". Rather it is a moral and ethical consideration that transcends politics. Officers often misquote a court decision which does not actually support their reason for claiming they cannot divest.
- Investment Strategy Statement (ISS): Council administrators issue an ISS that sets guidelines for the employees who make the investment decisions. A situation exists where committee members lack sufficient knowledge to create the ISS without relying heavily on the advice of those same employees the ISS is supposed to control. These ISS’s give minimum restraint over the employees. The unethical investments that result of that minimal restraint are then not inspected in detail by council fund administrators who rely on the same employees to provide the oversight. If there are failures in fiduciary duty, this is one.
- Ethics washing: In order to win scheme members trust, pension fund branding strongly emphasizes human rights and responsible investing, because they know that is what the majority of scheme members want. Only after difficult investigation can the ugly reality be seen to be far from aligning with societal moral norms. Deliberate deception would very likely be an illegal breach of trust, which is a fundamental fiduciary duty.
- UK Stewardship Code 2020: Some LGPS and most Pool companies are signatories. The code emphasises engagement with beneficiaries on what is important to them, among other things, to avoid negative social impacts. It could reasonably be considered a negative social outcome for scheme members to know their earnings are invested in weapons manufacturers against their will. Signatories have a responsibility to integrate social factors important to beneficiaries into investment policy.
For more explanation of the legal situation download this PDF document Devon Council LG Pension Weapons Investments
Some usual excuses
Many people across the country are challenging their LGPS administrators due to concerns that their money could be contributing to the Russian and Israeli aggressions. Or when they are stunned to learn some LGPS are purchasing bonds which directly put their earnings into Israeli banks who are on the United Nations list for lending money for illegal settlement building in the Occupied Palestinian Territories.
Instead of correcting their course, these are some of the usual excuses given for ignoring scheme members and campaigners alike:
"We're engaging"
“If we divest we'll lose power to influence the companies”
It is one thing to ask a regular company to make some environmental concessions, when that is the way things are going anyway. However there is no credibility to a claim that holding 0.005% of the shares of rapid land mine dispensing system manufacturer Northrop Grumman, will give a pension fund enough influence to stop them doing the number one thing they do to make money - its a weapons manufacturer. If they did comply, the shares would dramatically fall in value as weapons are 88% of their revenue stream.
- Pension fund fiduciaries (the pension committee members) are legally obliged to tell you the truth. If they claim to be currently engaging with these companies, ask for proof. If they cannot provide it, it could be proof of their dishonesty.
- There are clear expectations on sigantories of the UK Stewardship Code 2020 to report on their engagement and explain "how outcomes of engagement have informed investment decisions (buy, sell, hold)". Demand this from your fund.
“We don’t own the shares…”
"We only own a share of a fund that contains the shares"
The pension funds jointly own the pool companies (Brunel etc) and pays for their employees to buy the shares on their behalf, with the funds money, following the funds instructions, and who are provided details of the proportion of the specific company shares owned by each fund, down to the penny, which the fund signs off on and the fund retains full legal responsibility of oversight for.
“You're not a scheme member”
"We can't listen to mere tax-payers"
The Supreme Court agreed that taxpayers DO have "a legitimate interest in regulating how public sector pension schemes manage the money" just not a controlling interest, the same as the government doesn't have a controlling ability to dictate investments.
“We can’t take a political position”
"We're legally unable to listen to political protest"
This is somewhat true, it was agreed by the Supreme Court that the Funds must not be ruled by the government's political positions. Though this excuse is often given to campaigners who are not asking funds to follow their politics but merely to comply with societal moral norms and ethics which the funds already portray themselves as following.
“It will cost too much to divest”
"There will be penalties and costs"
The financial advisors will make a vague claim of this. It's true there are transaction fees to liquid stock trades and bond sales, though taken as a whole the weapons companies have risen significantly since October 7th so the profits should cover costs of a decisive divestment.
“We don't have to listen to scheme members”
"We can, but we don't have to"
This is true as the law stands. Even though it is the scheme member's earnings, once they have entrusted it to the scheme administrators it is down to them. This relationship makes the information provided by the schemes to the members, showing why members can trust in their responsible investor credentials, absolutely critical in terms of honesty and transparency.
Download the PDF for a more complete explanation of the legal situation, with useful links Devon Council LG Pension Weapons Investments
Let us help
If you have a reluctant fund administration and are seemingly at a dead end, or if you are unsure how to start a campaign, get in touch by emailing pensiondivest@pm.me and we will try to give some fresh ideas on how to move it forward.
This is not a legal advice service, though we are working on preparing a legal case which your example might form a part of... but working together we are stronger.