Environmental Responsible Investment Policy
“Chairman - It is generally recognised that burning fossil fuels contribute significantly to global warming, climate change and the decline in the biodiversity of the planet. If we are to meet the target for climate change mitigation it is imperative that current reserves of fossil fuels remain in the ground; their continued exploitation presents a substantial environmental risk to the survival of the planet for current and future generations.
West Lindsey District Council in adopting its Sustainability, Climate and Environmental Strategy has laid out a strong policy to address the threat from continued use of fossil fuels. However, to ensure successful implementation of replacing fossil fuels with renewable energies and green technologies the Council is asked to commit to the following:
1. Recognise that Fossil Fuel Investments are considered part of the Council’s Carbon Footprint.
2. To review its investment strategy to create an Environmental Responsible Investment Policy which not only rules out new investments in companies involved in fuels but also divests in such companies.
3. Through the above policy to actively seek to invest in companies that reduce greenhouse emissions and minimize climate risk and biodiversity decline.
4. To work with our Pension Fund Partners to adopt the same criteria to investments as outline in 2 and 3 above.
5. To actively oppose any new venture to extract fossil fuels ensuring that they remain safely in the ground.
I so move.
Councillor Stephen Bunney”
Minutes:
The Chairman advised the meeting that one motion pursuant to Council Procedure Rule No.10 had been submitted to the meeting, this was as set out in the agenda.
Councillor Bunney, was invited to put his motion to the meeting, and with the permission of the Chairman offered brief context asking Members to recognise that as a Government and Council we had agreed to work towards net zero carbon emissions by 2050, and understanding that to reach that target urgent action would be needed. The existence of the Council’s Carbon Management Plan was acknowledged but Councillor Bunney referenced how this did not include carbon measurements for Council investments or some property in ownership.
The motion as submitted was then put as follows: -
“Chairman - It is generally recognised that burning fossil fuels contribute significantly to global warming, climate change and the decline in the biodiversity of the planet. If we are to meet the target for climate change mitigation it is imperative that current reserves of fossil fuels remain in the ground; their continued exploitation presents a substantial environmental risk to the survival of the planet for current and future generations.
West Lindsey District Council in adopting its Sustainability, Climate and Environmental Strategy has laid out a strong policy to address the threat from continued use of fossil fuels. However, to ensure successful implementation of replacing fossil fuels with renewable energies and green technologies the Council is asked to commit to the following:
1. Recognise that Fossil Fuel Investments are considered part of the Council’s Carbon Footprint.
2. To review its investment strategy to create an Environmental Responsible Investment Policy which not only rules out new investments in companies involved in fuels but also divests in such companies.
3. Through the above policy to actively seek to invest in companies that reduce greenhouse emissions and minimize climate risk and biodiversity decline.
4. To work with our Pension Fund Partners to adopt the same criteria to investments as outline in 2 and 3 above.
5. To actively oppose any new venture to extract fossil fuels ensuring that they remain safely in the ground.
I so move.
Councillor Stephen Bunney”
Having being duly seconded, the matter was opened for debate, with the Leader making a lengthy response to each of the five points raised, as follows:-
“Re - Recognise that Fossil Fuel Investments are considered part of the Council’s Carbon Footprint.
West Lindsey, along with all Local Authorities has a key role to play in achieving the UK’s 2050 Net Zero greenhouse gas emissions target and phasing out the use of fossil fuels as soon as possible is crucial to that. Whilst West Lindsey District Council is directly responsible for only a small fraction of local emissions, through policies and partnerships Local Authorities have strong influence over more than a third of emissions in their area. Work to cut direct and indirect emissions is already underway through the Environment and Sustainability Action Plan and The Council’s Carbon Management Plan.
When measuring and reporting on the Council’s greenhouse gas emissions or carbon footprint, we refer to Scope 1, 2 and 3 emissions:
· Scope 1 is direct greenhouse gas emissions from sources owned or controlled by the local authority, for example emissions from boilers and vehicles. The Council has direct control over these emissions.
· Scope 2 accounts for emissions of purchased electricity consumed by the local authority. West Lindsey District Council impacts our Scope 2 emissions by choosing to purchase low carbon electricity, noting that ‘green tariffs’ do not necessarily support increased renewable energy provision. Checks are made if the energy is low carbon, using the Government’s greenhouse gas conversion factors for company reporting.
· Scope 3 includes indirect emissions from wider supply chains (often reaching international jurisdictions) emissions from the use of local authority services, contracted out services and investments. Councils have a strong influence over some of these emissions (e.g. contracted out services and investments) and less over others.
The Council makes no direct investment in companies. However, it may be investing indirectly in financial instruments, which are either provided by banks, building societies or managed funds, which may have associations with fossil fuel companies. We do not have influence on these organisations.
West Lindsey does go further than most Authorities by already recognising and considering scope 3 emissions. An estimated 69% of the 2019/20 footprint is associated with scope 3 emissions from leased buildings, leisure centres, business travel and commuting, water and waste.
For the council to decarbonise effectively and deliver on wider environmental and sustainability objectives it is vital that consideration of these impacts form part of every decision the council makes – including our investment decisions. Officers are developing tools and methods to better enable decision-making and financial appraisals that consider the environmental impacts of each decision alongside other factors. This is recognised as a priority in the 2021 Environment & Sustainability Action Plan.
Incorporating the full carbon impact of our investments into West Lindsey’s carbon footprint would be a challenging undertaking, but is something that can be considered by the Environment and Sustainability Member Working Group, alongside things that we are committed to examine such as our procurement decisions. Conclusions could be reported within, or alongside in the annual Greenhouse Gas Emissions report.
The GHG report is the performance framework that the LGA is looking to standardise across Authorities to make action on climate change visible and accountable within the everyday business of Councils, to allow performance to be tracked consistently and transparently.
Re - To review its investment strategy to create an Environmental Responsible Investment Policy which not only rules out new investments in companies involved in fuels but also divests in such companies.
Our Investment Strategy is reviewed on an annual basis and we are able to adapt it to what the Council considers appropriate.
Our strategy will always prioritise Security Liquidity and Yield, as required by legislation, as the key elements of our investment strategy and investments made.
The Council’s ethical approach lies within its Treasury Management Investment Strategy and includes provision for investment in Environmental, Social and Governance (ESG) investments that are, by definition, responsible investments.
In relation to the Capital Investment Strategy all projects are subject to full business cases, which include the requirement to consider Environmental Implications.
By making the policy too restrictive then other considerations may result in increased risk, so if an organisation had bad governance for example, we would be at increased risk of losing our investment and if most banks had some association with fossil fuel companies, or if local authorities we invest with have agreed to fracking in their area, reduce our counterparties. Undertaking the due diligence on such matters would take additional resources and potentially limit the opportunities for investment.
The definition of ‘involved’ becomes onerous without a clear definition, for example those involved in fuel extraction, banks that hold accounts on behalf of such companies, investment funds that invest in such companies, property funds that have tenants in these industries, for example.
Re -Through the above policy to actively seek to invest in companies that reduce greenhouse emissions and minimize climate risk and biodiversity decline.
We do not invest directly with companies from a Treasury Management perspective.
However we do try to keep abreast of new capital investment opportunities and would consider the environmental implications along with other factors as part of the business case for any capital investment.
Whilst West Lindsey does not invest in companies directly, as per (1) above, the wider impact of our decision making, including the commissioning, procuring and managing of contracts offers considerable scope for influencing carbon reduction. By encouraging and enabling our supply chains to become more carbon efficient, the council will be helping our suppliers to become better placed to thrive in our future low carbon economy.
It is a stated aim of West Lindsey’s Environment and Sustainability Strategy that our procurement decisions should better align with our action plan and targets. Carbon emissions that relate to goods and services procured by councils are classed as ‘Scope 3’ emissions. Councils have taken different approaches to whether they include Scope 3 emissions within their Net Zero targets. By looking at ways to incorporate procurement into our scope 3 considerations and favour companies with green credentials, our Council can increase its influence in this area and potentially have a similar effect as investing directly.
Re - To work with our Pension Fund Partners to adopt the same criteria to investments as outline in 2 and 3 above.
The pension fund currently categorises its investments based on the Global Industry Classification Standard (GICS) for holdings classified as ‘Oil, Gas and Consumable Fuels’. This category includes oil and gas exploration, production, refining & marketing, storage and transportation (including pipelines), and coal and consumable fuels.
At the end of December 2019 these holdings accounted for £20.7million of the total fund value of approximately £2.5billion – a very small percentage, but one that we would aspire to reduce. For context, in 2020, it was found that many councils that had declared climate emergencies still had substantial investments in fossil fuel industries through their pension funds; nearly £10billion in total.
The Council does have representation on the Pensions Board and as such can relay any decision the Council wishes to make. The view from the Local Government Association is that Local authority pension funds should disclose their approach to assessing and managing climate risks and should consider investing in Net Zero aligned schemes within their legal duties.
The determination of planning applications in relation to the extraction of fossil fuels is dealt with by Lincolnshire County Council under the current Lincolnshire Minerals and Waste Local Plan adopted in 2016. There is a policy that supports the ‘exploration, appraisal and/or production of conventional and unconventional hydrocarbons’ (Policy M9). However, the Central Lincolnshire Joint Strategic Planning Committee, of which West Lindsey District Council is a partner authority, has taken the view that both the legislative and policy context has evolved considerably since then.
As such the Draft Central Lincolnshire Local Plan, which will be consulted upon in Spring 2022, prior to submission to the Planning Inspectorate for Examination in Public (expected later in 2022) contains Policy S19 Fossil Fuel Exploration, Extraction, Production or Energy Generation, which makes it clear any proposal for fossil fuel based exploration, extraction production or energy generation for the determination by City of Lincoln, North Kesteven District Council or West Lindsey District Council will be refused on the basis that any remaining fossil fuels should remain under the ground as part of the commitment to a net zero-carbon society and economy.
Therefore, notwithstanding the County Council's responsibilities as the likely decision makers on such proposals, should one of the three district based Local Planning Authorities be the decision maker on a proposal which relates to fossil fuel exploration, extraction, production or energy generation, then policy S16 confirms such proposals will be refused. Ordinarily, however, the County Council is likely to be the decision maker. In such instances, the following policy cannot apply. However, the Joint Committee expresses its in-principle opposition to such proposals, and continues to respectfully request the County Council, as decision maker, and the District Councils as consultees, to take account of the Joint Committees’ in-principle opposition when each party either makes a decision or comments on a proposal, respectively.
This policy currently has limited weight in decision-making, however it provides a clear direction of travel and sets the context for West Lindsey’s position on the extraction of fossil fuels.
In effect we have ethical strategies in place, which may not be as specific as this motion would propose, but which ensure we consider and assess environmental impacts.
Whilst recognising the laudable aims of the motion, which is also clearly reflective of the Council’s direction of travel, I, and the Administration Group, are unable to support it and will vote against it for the reasons I’ve set out”.
At the conclusion of his response, the Leader requested that the Council’s Section 151 Officer, address the meeting to offer further advice and guidance to members.
In addressing the meeting, the Section 151 Officer indicated that in the context of the motion the term “involved in” would require an agreed definition. From a Treasury Management perspective, the Council was not permitted to invest directly into equities/companies, however the Council did invest in such projects as Money Markets Funds that may package together a number of organisations, some of which may be associated with fossil fuel extraction for example. Should the motion be supported, all Council investments would need to reviewed. The Councils Treasury Management Strategy currently indicated that the Council would consider ESG investments, which was a transparent ranking of all organisations available to the Council. There would need to be forensic analysis of any investments made in the future, which would require professional treasury advice or additional resources to enable Officers to look at investments in such a way. The risks and financial implications of such a change in Policy would need to be considered in greater detail, should the motion be supported.
Further debate ensued during which the matter of pension investments was raised. Pension investments was not a matter determined by this Authority, but by the Pensions Committee of the LCC, a former serving member of the Committee indicated that consideration had been given to such matters and concern was expressed that the motion would hinder plans already in place. The Green agenda and the use of fossil fuels was a complex issue with many difficult decisions and conflicting ramifications, and as such a number of Members expressed their satisfaction at the current approach and direction of travel to come in the future.
Members spoke of the laudable aims of the motion, but the specific nature and specific details, many considered put the Council at risk, giving examples. Should the Council not use fossil fuels in its vehicles? Do we invest in electrical vehicles, however their production came with ethical issues. The complex nature of sustainability was again raised. A number of Members considered the current policies in place provided a strong position and to adopt the motion would remove the Council’s flexibility to move forward in the clearest and most advantageous ways for both West Lindsey and the bigger picture. The specific nature of the motion some considered would not allow the Council to act agilely when needed.
In response to a Members’ enquiry the S151 Officer apologised to the meeting advising the Treasury Management Strategy, which included – ESG investments, previously referred to was not yet adopted but stood recommended to Council at their next meeting.
Other Members spoke in support of the motion particularly, aspect 5. Exercising his right of reply the submitter of the motion, addressed the meeting, thanking Members for the debate and views shared. He acknowledged the complex and area of work and the complex nature of the work that would need to be undertaken. He strongly believed that we needed to move forward, and act collectively across the world, to ensure everyone was held to account and as such it was a “fight” worth having.
A request for a recorded vote was made and duly seconded by a further Member.
On being put to the vote, votes were cast in the following manner: -
For: - Councillors Boles, Bunney, Clews, Cotton, Dobbie, Oliver, Panter, Rainsforth, M Snee, J Snee, and Young (11)
Against: - Councillors Bierley, Brockway, Coulson, Devine, Ellis, Fleetwood, Grimble, Howitt-Cowan, Lawrence, McCartney, J McNeill, Milne, Morris, Patterson, Regis, Rodgers, Summers and Welburn (18)
Abstentions: - Councillor White (1)
With a total of 11 votes in favour, 18 votes against and 1 abstention, it was RESOLVED that the motion be NOT ACCEPTED.