SOARING share prices have helped a local Government pension fund experience a “staggering” rise in value, but calls have been made to speed up its divestment from fossil fuel companies.
The City of County of Swansea Pension Fund had assets of £2.61 billion at the end of March compared to £1.98 billion at the end of March 2020.
The pension fund covers Swansea and Neath Port Talbot councils, plus other public sector employers, and has just over 20,000 paying contributors and 13,600 pensioner members.
A report on the fund’s draft accounts for 2020-21, which was discussed by Swansea Council’s local pension board, said: “After the sharp fall in global markets in the quarter to March 2020, returns bounced back almost immediately despite the ongoing challenges of the Covid pandemic which has been larger and longer-lasting than predicted.”
Jeff Dong, the council’s deputy chief finance officer, said: “It’s quite staggering, basically, the returns the funds have achieved in the year.”
The increase was higher than any other year in the last decade. The fund had assets of just over £1 billion in 2012.
Mr Dong also said it had outperformed many other local Government pension schemes in 2020-21.
But he added: “It would be unwise to rest on our laurels and expect another banner year next year.”
Pension board member and Neath Port Talbot councillor Alan Lockyer described the returns as “phenomenal”, and congratulated all concerned.
Fund management fees also rose sharply in line with the gains, from £10 million in 2019-20 to £13.5 million in 2020-21.
Swansea councillor Peter Jones asked whether it was time to take more risks in what he termed green investments, although he acknowledged the fund was moving in that direction.
Mr Dong said climate change was a risk, but that it was felt the fund’s “incremental approach” to divestment was “the sensible way to go”.
He said the pension fund was ahead of its target of a 50% divestment from fossil fuel companies by 2022, and that its investments in “passive” low carbon funds – investments designed to match, not beat, an index – had not been detrimental to overall performance.
Mr Dong said the harder part to address in this area was “active” funds, which are run by investment mangers who try to outperform an index.
He also said most observers felt that pension funds should be focusing on carbon emissions as a whole, not just fossil fuel companies.
Cllr Jones said given that Swansea Council had declared a climate emergency, and that “misleading” information had been put out over the years by fossil fuel companies, it would be a worthy public statement if the fund was to cease its fossil fuel investments entirely.
Mr Dong said the fund’s fossil fuel investments weren’t “blind”, and included engagement to press companies on their transition to low-carbon. He also pointed out they still heated and powered our homes.
“To completely wash your hands your hands of that important sector would be slightly irresponsible,” he said.
“For everyone to divest in them and for them to go bankrupt would help no-one, not in the short term – the world still has fossil fuel needs and demands.
“It would also not help in redeploying that huge intellectual capacity into developing efficient renewables, and efficient tidal power.
“I think they are seeing the light now, Cllr Jones, and they do recognise the universal clock is ticking.”
Cllr Jones said he and Mr Dong would have to agree to disagree.
Cllr Jones referenced Prime Minister Boris Johnson’s recent speeches in New York on climate change ahead of a world conference in Glasgow in November.
“He’s just said that now is the time to act – it isn’t, it was 20 years ago,” said Cllr Jones.
Cllr Lockyer agreed that action had been needed 20 years ago, but said the pension fund would need to be careful in any investments in energy companies given the recent spate of gas retail firms going bust.
The pension board went on to hear about a “net zero” approach, but this part of the meeting was held behind closed doors.