MSP pension fund aims to be more ethical – but ups fossil fuel investment

The company managing Holyrood’s £86 million pension fund has ploughed more money into fossil fuels and opposed bids to combat sexual harassment and hate speech despite MSPs’ attempts to make investments more ethical.

Edinburgh-based fund manager, Baillie Gifford, has increased the Scottish Parliament’s investment in oil multinational, Shell, and used its power as a shareholder to vote against a sexual harassment policy at online retailer, Amazon, and a suggested human rights committee at credit card firm, Mastercard.

Campaigners and MSPs accused Baillie Gifford of “operating outwith any ethical guidelines” and called on the cross-party committee of MSPs which oversees the fund to make sure money is invested ethically.

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In December 2018 The Ferret revealed MSPs’ pensions were invested in companies dealing in arms and fossil fuels, as well as firms controlled by Russian oligarch allies of Vladimir Putin.

In January 2019 the five MSPs who oversee the pension scheme asked government actuary, Andrew Maclaren, to look into ways of making the investments more ethical.

In the second quarter of 2019 Baillie Gifford retained MSPs’ existing shares in companies and increased their investment in the £300 billion Anglo-Dutch oil and gas company, Shell, from £360,000 to £430,000.

In its report for April-June 2019, the fund manager explained the decision: “We think the market is underestimating both the quality of the assets owns as well as the determination of management to simplify the group and pay down debt”.

According to the Climate Accountability Institute, Shell is the fourth most polluting private company in the world. It is responsible for releasing over 31 billion tonnes of climate-warming carbon dioxide into the atmosphere since 1965.

Ric Lander, divestment campaigner at Friends of the Earth Scotland, said Shell had made a “humungous contribution to the climate emergency” and has “a significant record of human rights abuses.”

He added: “MSPs must not continue allow their pensions to be invested in companies driving the climate emergency – and be prepared to feel the heat if they aren’t able to align their own investments with their commitments for Scotland to address climate change.”

As well as deciding where MSPs’ pensions are invested, Baillie Gifford votes on their behalf at the annual general meetings (AGM) of companies in which it invests.

At Amazon’s AGM in May, Baillie Gifford voted against proposals from shareholders to issue reports on sexual harassment and products which promote hate speech. These motions were “too prescriptive”, it said.

The former head of Amazon Studios, Roy Price, resigned in 2017 after being accused of sexual harassment and of ignoring sexual assault claims about his friend, US film producer Harvey Weinstein.

In June, Baillie Gifford voted against a motion to create a human rights committee at Mastercard because they “believe it to be unnecessary”. This motion was proposed by campaign group, SumOfUs, and was intended to stop Mastercard processing payments for far-right hate groups and websites.

Eoin Dubsky, campaign manager at SumOfUs, told The Ferret: “It’s astonishing that Baillie Gifford thought it was unnecessary for Mastercard to institutionalise a commitment to promote human rights, a proposal put forward by SumOfUs members at the company’s AGM last year.”

He added: “We’re waiting for Mastercard executives to demonstrate they have taken the necessary steps to protect and promote human rights. In the meantime, we encourage Scottish MSPs to stand up for human rights and face the dark truth of their pension investments.”

Baillie Gifford did support shareholder proposals for increased gender pay gap reporting at Facebook, Mastercard and Google’s parent company, Alphabet.

Since announcing an ethical review in January, the parliamentary committee overseeing pension investments has met three times. The minutes of the March and June meetings have been posted online and the minutes of the third meeting will be released after they are approved in late November.

The June minutes show government actuary Maclaren proposed setting up a third fund alongside the existing two. The minutes state this fund would be created “with the aim of incorporating a higher ethical, environmental, social or governance approach into the investment strategy”.

Maclaren was told to come to the next meeting with more information about the cost of setting up a third fund and how much assets should be allocated to it.

Campaigners said that Maclaren’s proposal does not go far enough. Don’t Bank on the Bomb Scotland has been urging the pension scheme to drop its investment in Rolls Royce as the company is involved in Britain’s nuclear weapons programme.

The campaign group’s spokesperson, Linda Pearson, was pleased that trustees appeared to have taken on board concerns about the scheme’s unethical investments. “But the proposal to open a third more ethical fund does not properly address those concerns,” she said.

“The scheme would still have money invested in harmful industries through the other two funds. We believe that the whole scheme should be invested in a fund that comprehensively excludes companies involved with nuclear weapons and other activities that conflict with the stated values of the Scottish Parliament.”

Andrew Smith, of Campaign Against Arms Trade said: “It’s not enough for the Scottish Parliament to talk about investing ethically, it actually has to do it. There are few industries as immoral as the arms trade and big oil, which have had a devastating impact on the planet and people across the world.”

He added: “The parliament must live up to its words and draw a line in the sand. It must take the opportunity to set a positive precedent for others to follow by ending this support and investing in positive and sustainable industries.”

Labour MSP, Neil Findlay, and Green MSP, John Finnie, also criticised Baillie Gifford and called on the committee to take action.

Findlay argued that the Scottish Parliament should lead by example but “current pensions investments appear to be perpetuating hypocrisy with a ‘do as I say not as I do’ attitude. Fund managers seem to be doing whatever they like and are operating outwith any ethical guidelines. I hope the pensions trustees look into The Ferret’s findings and act immediately.”

Finnie called for the fund managers to be replaced. “It’s clear the move to switch these investments to more ethical options has not been successful,” he said. “If we’re going to clean up our pensions, the fund managers seem a good place to start.”

Finnie also criticised councils and public bodies for failing to address the ethics of their pension funds. In April The Ferret revealed a number of councils had pension investments in arms firms.

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Baillie Gifford declined to comment. The MSPs on the committee either did not respond to a request for comment or referred The Ferret to the Scottish Parliament’s press office.

The MSPs are Liberal Democrat Tavish Scott, who chairs the committee, the SNP’s Gil Patterson, the Scottish Greens’ Mark Ruskell, Labour’s Pauline McNeill and the Conservative’s Alison Harris.

A spokesperson for the Scottish Parliament said they were not in a position to comment until the MSPs have met next week to discuss the issue.

Shell stressed that it supported the Paris climate agreement and the need to transition to a lower-carbon future and was investing in low-carbon technologies.

“Shell is committed to respecting human rights. It is fundamental to Shell’s core values of honesty, integrity and respect for people,” said a company spokesperson.

Baillie Gifford quarterly reports

2019 11 13 Report for Quarter Ending 30 09 2019 (Text)

2019 08 26 BG Quartely Report 30 June 2019 (1) (Text)

Baillie Gifford Sept 2018 (Text)

This story was updated at 17.00 on 15 November 2019 to indicate how much Baillie Gifford’s investment in Shell had increased.

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