Friday, July 11, 2008

London Local Authorities Pension Campaign - my report

How local authorities are investing in unscrupulous corporations” Last week I went to a meeting at the left wing bookshop Housmans in Kings Cross. This is the first time that I have been to Housmans. It is the sort of place that you could easily spend a hour or so looking through bookshelves at various bits and bods. It also hosts a number of evening events for “community and radical groups”.

I had never heard of the "London Local Authorities Pension Campaign" and being the anorak that I am, decided to play a visit to this event.

Redpepper described it as such “Thursday 3rd July 2008 – 7pm This talk will mark the launch of a new campaign that aims to disclose how local authorities are investing funds from our council taxes and pension schemes into some of the world’s most unscrupulous corporations – often without knowing it.

By collecting data through the Freedom of Information act, and networking with a range of anti-corporate and corporate accountability campaign groups and individuals, a picture has emerged in which local authorities are investing in companies that are raping the environment, profiting from war, and trampling over human rights. The campaign has received support from Corporate Watch, Campaign Against Arms Trade, Islington Friends of the Earth, Greenpeace and FairPensions amongst others”.

I went with a shy and retiring UNISON colleague.

The meeting was organised by Michael, who by co-incidence is a member (paid worker?) of the Amicus UNITE housing branch. There was about 20 people present, half of which, Michael said were his “friends and relatives”. He described how first got involved in this issue because he was horrified that his Council tax payments was being used to invest in the Arms trade in such companies as BAE. He had used the Freedom of Information (FOI) Act to contact all of the London Councils to find out what the top investment holdings were. All the councils replied, except for the City of London (who very efficiently replied to his request but simply refused to disclose – so no real surprise there) and Croydon Council (who claimed that they could not supply such details since they had “pooled investment funds” – hmmmm, what nonsense). Michael apologised that a speaker from Fair Pensions was not able to attend. He was (for reasons he explained fully afterwards) not very happy about this.

The next speaker was Richard from the Mining Network (which I think is connected to the website Mines and Communities). London is the world's centre for raising finance for international mining companies. Nearly all the major companies are listed on the London stock exchange. Richard described how some of these companies have driven people off their land without compensation and ruined the environment. However, he said that his group had used the “engagement” argument with these companies to try and encourage them to do some good things rather than bad. London Council pension funds invest a lot of money in mining companies.

The final speaker was Robin from the London branch of the Campaign against the Arms Trade (CAAT). Their main campaign at the moment is with Islington Council who has 0.6% of its pension fund invested in the "arms trade". He does not believe in the engagement argument for arms companies. He is pretty confident that they will be successful in Islington. He pointed out that if some councils do not invest in the arms trade for investment reasons, without any apparent negative cost to the scheme, then why shouldn’t other councils decide not to do so on grounds of principle. In Merseyside, the majority of councils who contribute to the local pension fund, had voted not to invest in the arms trade (actually it was over "cluster bombs" but nevermind) but the fund had refused to accept their decision.

There was in my view anyway, a pretty useful and wide ranging discussion afterwards about the campaign. The ambitious UNISON capital stewardship programme was brought up. I think that it is also fair to say that there was a polite frank exchange of views on some matters. In particular the view that actually pension funds do not belong to the Council's nor tax payers but actually to the Council employees. Also, the primary purpose of the funds is to provide a safe and decent retirement for employees. Actually, I thought that there was a broad consensus on the need for council pension funds to manage their funds in a socially responsible manner.

I have always thought that the disinvestment argument (not investing in companies such as British Aerospace) for the arms trade was counterproductive. Like it or not, it is clearly unlawful for Council pension funds not to invest purely on “ethical” arguments. That is not to say that you could not argue against not investing in a company, that say produces landmines. Since you could argue that there is a risk to the fund by investing in such a company, because the reputational risk could harm the value of the investment.

Personally, I think that the campaigners in CAAT are actually letting pension funds off the hook by concentrating on the disinvestment argument rather than the more difficult to argue against “engagement” argument (check out the UN Freshfields report).

I will also declare a personal interest. My father was for many years employed as an aircraft electrician by a company that ultimately became a part of Airbus. He has the assistant branch secretary for the electrician union at this factory in the 1950’s. For many years, the production of war planes at Broughton brought bread to our family table. The factory was/is a major employer in my home town. Keeping it in the family, one of my brother-in-laws, is also an aircraft technician and often works on military contracts. If we are not pacifists and continue to have an army, navy and air force in this country how can we be against investing in companies that manufacture arms? This argument is utterly different from that about selling arms to dictatorships or paying bribes for contracts.

Michael gave out a list of the top 24 holdings by London Council pension funds. At the end of the meeting I went through this list with him. At the TUC pension trustee conference recently there was a comment that how could any pension fund not invest in BAE since there was practically no other major manufacturing company in Britain?

Arguably, my own pension fund in Tower Hamlets Council would have "problems" (moral hazards) with investing in nearly every company listed. Oil and gas (destroying the environment); banks and insurance (for usury - many members are Muslims); Mining companies (as above); Tobacco (obvious); drugs companies (animal experiments); drink companies (obvious); Nestle (baby milk powder). In fact the only companies in the list that I could not think would be objected to by someone would be Videophone and BT.

Of course, I have now remembered that telecommunication companies sell and export military communication equipment as well! So they are out! The problem is even more complicated since Michael’s own union UNITE organises in BAE. No doubt these trade union members will also have a view on their jobs.


Anonymous said...

Dear John

Firstly, thanks for coming to the event and contributing to the campaign through your feedback, and further publicizing it. I even learned that the event was publicized in Red Pepper! Sorry for the delay responding.

I have to admit I was surprised by your description of your UNISON colleague as shy and retiring, I look forward to meeting your more colourful and extravert colleagues. That said I think he made an extremely valuable contribution to discussions and it was a shame he had to leave so early and without leaving any contact details.

There are some matters of accuracy I must make clear. Firstly, I am not a paid official of any trade union nor have I ever been. I suspect I would be pressured to give up the cause if I were since, as you state correctly, UNITE organizes on behalf of BAE. Having said that my branch being the great bunch of people they are, voted to affiliate to CAAT and I know of a number of activists within the union who believe that taxes and workers time could be better spent.

You also state that I was moved to campaign upon learning that my council tax payments were being used to invest in arms. In actual fact it was learning about my own occupational pension scheme (the Social Housing Pension Scheme) that stirred me to begin campaigning for responsible investment in my former place of work. The companies that were invested in by our scheme which incensed me, were those highlighted by a United Nations report into the war in the Democratic Republic of Congo. A war which caused over 5 million lives . The UN's report highlighted the role of a number of multinationals and individuals in fuelling and profiting from minerals and exports for arms in 'Africa's World War'. Through a white zimbabwean arms dealer and sales to the Zimbabwean government during the war, BAE also profited. When I changed employer, and learned of Freedom of Information requests I decided to research my old dormant pension with the London Borough of Ealing and found some of the same companies on the investment list (I now appreciate that these companies are so big they feature in most schemes investments though not all it must be said). Around the same time I also learned of local authority pensions role in the campaign against apartheid South Africa. Disinvestment (not engagement) was a significant and effective strategy of the anti-apartheid movement. I began researching the investments of the other London local authorities I had relationship with (through work, residence and friends) and eventually decided to research all the London borough's investments.

The speaker from Fairpensions was able to attend but was forbidden from doing so because a number of stakeholders had insisted that fairpensions should not get involved in any campaign which calls for disinvestment from any particular companies or sectors such as arms, for example.

Richard Solly is a member of London Mining Network, but was speaking in a personal capacity in order to inform us of the impact of mining companies on the environment, indigenous peoples and the communities they operate within.

I didn’t think that any of the participants had stated that local authority pensions belong to anyone other than the members of the scheme. Neither did I feel their was any ambiguity about the main purpose of a pension fund. However, it was stated that our local councillors act as the trustees of each fund, and their stated strategy of investment is to minimize risk in order to lower the liability of the tax payer. Therefore, if the tax payer were willing to cover the supposed added risk of divestment from a particular sector such as arms, divestment should be possible. The strategy of minimizing risk and linking this to council taxes has been stated to us in correspondence from local councillors, local authority officers and is even written into a number of the ‘statements of investment principles’ produced by local authority schemes.

I also advised the meeting that I had tried to involve members of the London Borough of Islington pension scheme and in particular UNISON shop stewards but they had refused to respond to correspondence on that issue, though they had been happy to converse with me on other matters such as the recent march against the BNP (who have had very little to do with the death of 5 million Africans much as it might please their members).

With regard to arms investments, we don't pursue a strategy of engagement because we believe that as long as the production of arms is based upon profit motives and increasing exports, they will continue to have a vested interest in seeing more conflict in the world to increase sales, production and therefore profit. That is more Congo's, Iraq's etc. Furthermore, the more that is invested in arms the less there is to be spent on more socially useful production or services, this is particularly important when considering the value of contracts to developing countries but equally so here at home.

That BAE is our countries largest single company in the manufacturing sector at present says more about the poor state of our government’s foreign and economic policies than it demonstrates a need for pension funds to continue investing therein. There are plenty of other more sustainable opportunities for investment that could provide the same workers useful employment for their skills. Remember the plan created by Lucas Aerospace workers and their attempt to promote such a change of production? There is also more up to date research on socially useful alternatives to arms CAAT's website

I was disappointed by you and your colleagues view toward disinvestment from arms companies given that UNISON seemed to be leading the way in this area having disinvested itself and the annual conference calling for others to do the same I was also disappointed by your opinion that disinvestment is letting companies off the hook. As trade unionists we take it for granted that when engagement with our employer fails we ballot for strike action. Therefore, when the managers of capital fail to respond effectively to the concerns of the capitalists (as your UNISON informed us we now are) our only course of action is to withdraw our capital. In any form of engagement with mnc’s there must be some form of sanction, disinvestment is the only one open to investors. In fact, why would you as the manager of capital take any notice of an investors concerns if you knew the ultimate sanction had already been put beyond use? Negotiations / Engagement is pointless when the other party already knows what action you will and will not take to pursue your ends. Other countries do not have a problem with disinvestment, the USA, Netherlands, Norway all have pension funds which disinvest for ethical reasons and are always threathening to it seems.

Yes some members will disagree with some or all areas of the economy/companies invested in by pension funds, on matters of ethics this inevitable. However, some areas can be engaged with (drug companies/Nestle) for example. Furthermore there are Sharia banks (they are probably doing better than the secular ones at the moment). But this is not as insurmountable as you suggest and can easily be solved by a simple consultation of members/tax payers on what sectors they do not want THEIR money invested in, which sectors they believe should be engaged with, why and toward what end. Those members who are in the minority can then vote with their feet if they feel strongly about the issue in question. Alternatively they could hold on in their and campaign for a change of investment policy until the matters comes up for review.

As I said at the meeting whatever the majority decide is the priority for their pension is up to them if it's minimum risk at the expense of people and planet then my job is to convince them otherwise. But I still think their is very little awareness of where pensions are invested and that each resident of the UK has a role in financing the likes of BAE. Where members are aware of the companies invested in, they have little knowledge of their negative activities in the process of 'creating' their wealth. Likewise tax payers need to know that local authorities invest in arms, and what's more that they do so to minimise their tax liabilities for employees pensions. Hopefully learning this will get them to tell their councillors otherwise, in our experience this has certainly been the case. Either way an important lesson for all is learned through the knowledge that British workers / tax payers continue to benefit from much exploitation around the world not just at the point of consumption which is often taken for granted but through investments and profit also.



John Gray said...

Hi Michael
Sorry about not responding to your email sooner. Problems with computer. Will send contact details of collegue next week and respond propery to your comments. You are more than welcome to do a guest post on this subject if you want? Just email it with maybe a photo or something.

Anonymous said...


I understand you are busy and therefore have not found time to respond to date. I just thought I should share something I've learned from further research that Merseyside's pension fund borough councils did indeed intend to disinvest from arms compananies generally and not just those producing so-called unconventional weapons using depleted uranium.


Anonymous said...

oops forgot to include the relevant link!


John Gray said...

Hi Michael
Apologies for not responding sooner. Check out this post on the problems with disinvestment and the LGPS Roberts v. Hopwood 1925 case; there is also the famous Bromley v GLC case “Fares fair” (which Ken lost) which also held that local authorities had to act in a rational and business like way. Cowan v Scargill has been widely misinterpreted but is still important for pension trustees not so much the LGPS since it is not trust based and is subject to administrative law fiduciary duties. The Freshfields report is really important in that it encourages investors to consider issues over than maximising returns but it does not change or challenge the fact that in the LGPS, Councils have to be objective and cannot disinvest from lawful and regulated British companies on “moral” grounds alone. . Any council tax payer faced with a Council who tried to argue that they will (unlawfully) allow the pension fund to disinvest and will increase its council tax to fund this risk would have its A**** sued pdq.
The UNISON motion urged LGPS reps to consult with members on the arms trade (a good thing) and “request” (engagement?) a change in the investment policy.
So you are left with arguing for alternative investments on grounds of investment risk (a pretty poor one to be honest) or you have engagement.
I think that the responsible investor article is probably more accurate than the Daily Post? But I haven’t seen the full proposed motion.
Check out on how to contact the lead UNISON officer for Capital Stewardship.

Anonymous said...

This claims to be the actual wording. I'll have to leave it to you to verify the source or find the true one because to the best of my efforts I've been unable to, and yes I have checked the merseyside funds minutes etc most of the relevant info has been excluded.

Anonymous said...

One more reference I will come back to you on those points you raised a bit later

Pretty sure this is the actual motion now.


Michael J

John Gray said...

Hi Michael J

I think the key issue is what is lawful or not. Why is engagement considered as the 2nd best (or worse)option?