Scotland’s largest council pension fund will end investments in fossil fuel firms if they fail to act on the climate emergency.
Calls for the £24bn Strathclyde Pension Fund to divest from coal, oil and gas companies have intensified in the build-up to major climate conference COP26.
Ahead of world leaders arriving in Glasgow in November, members of the pension fund committee have backed disinvestment if firms do not meet environmental standards.
The move follows a motion passed by Glasgow City Council in April which urged the committee to formally pledge to ending fossil fuel investment before COP26.
Campaigners have welcomed the “positive step”, but say the issue remains unresolved, with the next committee meeting in September key to whether divestment is agreed prior to the conference.
All energy sector firms in the fund’s portfolio will be assessed and required to meet certain standards, which will be set by investment managers and Sustainalytics, sustainable investment specialists.
Councillor Richard Bell, who chairs the pension fund committee, said: “The fund has long been a leader in terms of measuring and disclosing the carbon impact of its investments; using its clout as a shareholder to push for better environmental outcomes and backing renewable energy.
“However, it is important that we continue to be bold and to lead from the front – and that is why we have agreed divestment will play a part in our strategy in future.
“We’re putting fossil fuel companies on notice that, if they don’t take their responsibilities on carbon or climate seriously, then we are prepared to drop them from our portfolio.”
A study by Friends of the Earth Scotland estimated the pension fund – which has over 250,000 members – has £508m of investments in fossil fuel companies.
However, fund director Richard McIndoe said direct investment is around £62m.
Mr McIndoe said the fund would be able to “judiciously disinvest” from “bad oil companies” but added “disinvestment is not a panacea”.
Sally Clark, divestment campaigner at Friends of the Earth Scotland, said: “The decision is a positive step, but there is so much more to do to set Scotland’s largest public pension fund on a fossil-free path.
“Oil, gas and coal companies’ business model relies on worsening the climate emergency, damaging communities in Scotland and globally.”
She added: “Divestment from climate polluters could provide global leadership as Glasgow prepares to host the crucial UN climate talks.”
More than 500 people signed a letter from campaign group Divest Strathclyde to support fossil fuel divestment.
Geraldine Clayton, a Strathclyde fund member and climate activist, said: “I don’t want my pension to be invested in the fossil fuel companies that are most responsible for causing the climate crisis.”
She added shares in fossil fuels are “increasingly being seen as risky investments by the financial sector” and resources should be directed “into creating a safer world for future generations”.
Committee member Cllr Graham Campbell said: “We are clearly going to a future where a large percentage of the market for these fossil fuel companies is going to disappear.
“My concern is why can’t we get out quicker? Why can’t we divest in a way that stops doing the damage?”
Mr McIndoe said: “Can we divest from every company whose activities we don’t 100% approve of? I think it’d leave us very, very few companies.
“You also have to ask would it make any difference; in most cases this activity will continue anyway until it’s legislated against.”
Councillors from the Scottish Greens brought the motion to council in April.
Cllr Jon Molyneux, the group’s co-convenor, said this “landmark decision” will, if implemented properly, mean the fund “stops investing in fossil fuels, which put all our futures at risk”.
He added: “It’s clear however that the decision today is just the start of a process and divestment must be based on robust minimum standards, not industry greenwash.”
By local democracy reporter Drew Sandelands