TfL slammed for fossil fuel investments following new report into GLA pension funds

Transport for London’s (TfL) pension fund has continued investing in fossil fuels, a new report reveals - a strategy slammed as “inconceivable in 2023” by one of the city’s assembly members.

In its latest report, the Greater London Authority’s (GLA) oversight committee presented a list of 18 recommendations relating to the pensions encompassed under the GLA Group.

Among the recommendations, the committee, led by Labour Assembly Member Leonie Cooper, called on the £14.4bn TfL Pension Fund to publish information on its investments in London - and on the mayor to press the fund to “develop urgent action plans and take action to divest completely from extractive fossil fuels”.

The report notes that the mayor’s 2021 manifesto included a commitment to “working with the LPFA (London Pension Funds Authority) and the trustees of the TfL Pension Fund to ensure investments are ethical, including divestment from fossil fuels and maximising the good they can do for Londoners”.

While progress has been made with the LPFA, which is responsible for schemes including some under the GLA, the same approach has not been shared by the TfL Pension Fund.

Padmesh Shukla, chief investment officer at the fund, told the committee he believes “there is a role for these stocks in the short term”, describing the inclusion of oil and gas stocks as “part of a diversified portfolio in the short term”.

Mr Shukla continued: “Secondly, it is very easy for us to hit the targets just by divesting from anything we hold in oil and gas. The question is, once you leave the table, how do you then engage with any company?

“Engagement is a big part of what our trustees are trying to do. They talked about our membership of organisations like Climate Action 100, the Carbon Disclosure Project and so on and so forth.

“You can only go and push companies to do something, whether it is Shell or BP, if you are actually owning those companies. Once you leave the table, what is there? On the margin, it is better for responsible shareholders to be owning these companies and to make the right changes because, if we all divest, it is not making any real life impact because less responsible owners will hold the shares and probably they do not care about climate change.”

In response to the report, a spokesperson for the climate campaign group Extinction Rebellion told LondonWorld: “We are at Code Red on climate. All politicians should be doing everything in their power to take urgent and radical action.

“Divesting from fossil fuels makes sense, not only to avoid ecosystem collapse, but also to avoid finding their assets stranded when legislation is finally put in place to prevent these companies from fully exploiting their reserves (these plans are entirely inconsistent with goals of safeguarding our future on this planet).

“Anyone who cares about a habitable planet should join us outside Parliament for The Big One, from April 21-24 to push our so-called leaders out of their complacency. Together we are powerful.”

Zack Polanski, deputy Green Party leader, a London Assembly Member and chair of London’s environment committee, added: “It’s inconceivable that it’s 2023 and we’re still having these conversations about divestment, particularly in an organisation as big as Transport for London and where the mayor has made the climate something he talks about so often. So I’m really pleased this recommendation is in this report.”

A TfL spokesperson said: “The TfL Pension Fund is independent of the mayor and TfL, and its trustees are legally required to make decisions in the interests of its members.

“Since 2016, very significant progress has been made by the fund to embrace sustainability in all investment and risk management activities. This has led to its “green” investments increasing from virtually nothing to more than £370m.

"In 2021, the fund trustees announced ambitious net zero targets which would aim to deliver a 55% reduction of the fund’s carbon footprint by 2030, increasing to 100% by 2045 when compared to a 2016 baseline.”

What does the TfL Pension Fund invest in?

According to TfL’s accounts for the 2021/22 financial year, the most recent for which information is available online, its top three shares were in Alphabet, the owner of Google (£53.8m), Microsoft (£49.1m), and Charter Communications, a telecommunications company (£41.1m).

Other notable names in its top 25 included Sony (£31.4m), Meta (£25.6m) and Amazon (£25.1m).

The documents note that Blackrock manages 25% of the fund, with a number of other companies, including Goldman Sachs and JP Morgan, managing particular specialisms, such as global equities and emerging market debt.

None of the top 25 shares for 2021/22 were in gas or oil companies.

Leonie Cooper, the Labour chair of the GLA oversight committee, said the committee did not have access to which fossil fuel companies the fund is investing in, just that it was continuing to do so.

What else was included in the report?

In addition to the committee’s environmental concerns around some of the funding, the report made recommendations on areas from promoting the London Fund, which invests in improving the capital’s infrastructure and housing, to London boroughs, to better-aligning the GLA Group pension schemes.

In the background a review into TfL’s pension scheme is ongoing, after the government stipulated as part of its funding deal in June 2021 that the transport body would review the scheme and look at reforms.

Ms Cooper said of the report: “There is a balance that must be struck when considering pension funds.

“Whilst it is essential that pension funds have a diverse portfolio of investments, it is also important, now more than ever, to consider the impacts specific types of investments have on the environment.

“Whilst we are in the midst of a climate emergency, we need to show strong leadership in the fight against climate change, and we believe that by divesting from fossil fuel investments, we send a clear message that we are taking this issue seriously.

“There are also some simple steps these organisations can take to be more transparent and to improve the lives of Londoners, by investing in the London Fund for example, which will improve housing and infrastructure across London.

“I hope our recommendations are considered and I look forward to receiving a response on these matters in due course.”