Pondering over divestment: Border to Coast re-examines the quandary
In the world of investment, a heated debate has been ongoing for some time - how asset owners should deal with the world's largest emitters in the fight against climate change. This debate has evolved in its legal complexity, economic logic, and ethical reasoning over the years, and it's a discussion that continues to resonate within the industry.
Last year, Tariq Fancy, BlackRock's former chief investment officer, added his voice to the conversation with a passionate plea against divestment in a book titled "The Secret Diary of a Sustainable Investor." However, the book did not provide any findings from his research.
Meanwhile, the pool, an active player in climate stewardship discussions, currently holds over £2bn invested in fossil fuel companies, according to Platform, a campaign group involved in the debate about divestment. This revelation has sparked concerns among those advocating for a more sustainable approach to investing.
The pool, however, has backed 76% of environmental resolutions, as per its latest stewardship report, indicating a commitment towards sustainability. Yet, the optimism for engagement over divestment, once broad-based and confident, is now more cautious.
In June 2023, the Church of England Pensions Board announced they would divest from emitters if they were not Paris-aligned. This decision was followed by a similar move by Akademiker Pension in September 2023, who divested from Eni, the Italian energy company, citing frustrations over engagement outcomes.
The Border to Coast Pensions Partnership, a £64bn fund, has also taken a significant step towards divestment. They commissioned new research on the effectiveness of divestment and, as a result, have narrowed their investment scope to more sustainable assets by excluding companies with significant carbon emissions. This decision could significantly affect the £64bn pool.
Dr. Tom Gosling, an executive fellow at the London Business School, spearheaded the research commissioned by the Border to Coast Pensions Partnership. His work provides an overview of the academic evidence on the efficacy of divestment, offering insights into the ongoing debate.
The debate about divestment is far from over, with several organizations such as universities, religious groups, and pension funds having committed to carbon divestment. As the world grapples with the urgent need for climate action, the role of investment in shaping a sustainable future continues to be a critical topic of discussion.
