Strathclyde Pension Fund, Glasgow, Scotland, put fossil fuel-linked investments worth £62 million ($88 million) on notice and will divest companies that won't engage with the fund about a transition to a low-carbon economy.
The £26.8 billion pension fund made a move June 2 in response to a call from the Glasgow City Council, which asked April 1 that the pension fund makes a formal commitment to fossil-fuel divestment ahead of the United Nations' Climate Change Conference, known as COP26, which is taking place in November in Glasgow.
The council wanted the fund to divest completely as quickly as possible before 2029 and consider investing in green projects in the Strathclyde region.
Richard McIndoe, director at the pension fund, said in an email that conditions are yet to be agreed upon with companies that are on watch as the fund develops its climate change strategy that will sit along its responsible investment strategy.
The fund will carry out an assessment of energy sector companies in its portfolios and set minimum standards, while consulting its managers and research and analytics firm Sustainalytics.
"We're putting fossil fuel companies on notice that, if they don't take their responsibilities on carbon or climate seriously, then we are prepared to drop them from our portfolio," Richard Bell, chairman of the pension fund committee, said in a news release.
"We also understand that some of those traditional energy firms are at the forefront of investing in a low carbon future — but those responsible, forward-thinking companies will welcome Strathclyde setting a high bar. Ultimately, this is about saying that we won't stand for companies putting our investment — and the retirement savings of hundreds of thousands of our members — at unnecessary risk," he added.
Separately, the fund's board approved its intention to achieve net-zero carbon emissions by 2050. The fund is also expected to change the benchmark for 5% of its global equity allocation to Research Affiliates Fundamental Climate Transition index from Research Affiliates Fundamental Index when it becomes available, according to minutes of the June 2 meeting. The fund's total equity allocation is 52.5%.