This is something I have been pressing for ever since I was appointed to the pensions committee almost three years ago. While it is some way from the full divestment I and the Green Party would like to see, it nevertheless means that millions of pounds will be divested out of fossil fuel companies.
In practical terms, what has been agreed will impact of the fund's investment in passive equities. MPF currently invests over £1.1 billion in UK and US tracker indices. These track the overall stock market and make no allowance for the carbon intensity of these investment.
Now, an initial one-third of these passive investments (circa £370 million) will be moved into low-carbon index trackers. The time scale for this is the next four to five months. The carbon intensity of these investment funds is expected to reduce by 50-70%.
Furthermore, this is just the start. The head of the pension fund has clearly indicated that he wants to see more steps in this direction and measures to further reduce carbon risk in both active as well as passive investments in the future. That is certainly something I will be pressing for.
My understanding is that Merseyside is only the second local authority pension fund to date to actively implement measures to reduce its carbon risk. It is also by far the largest to do so. Hopefully this is just the beginning and other local authority schemes will take similar, urgent steps to reduce the clear risk that holding high carbon assets poses for members of pension schemes. In particular, I am hopeful the MPF's pooling arrangements with Manchester and West Yorkshire will encourage those funds to take a leaf out of Merseyside's book.
This of course is merely part of a global divestment push that has seen many private sector schemes publicly divest from fossil fuels. Just this week, Lloyds of London announced it would no longer invest in coal companies.
The writing is on the wall for fossil fuels. I am delighted and proud that MPF has taken a lead on this and to have played an active role in its implementation.
You can read the detail of what has been agreed under item 9 "Management of carbon risk" via this link.
You can watch the relevant part of the committee debate courtesy of John Brace's video link.