UK trade union support for fossil fuel divestment sparks debate

This September, the UK trade union movement made a historic decision to support a campaign to strip millions of pounds worth of fossil fuel investments from workers’ pensions.

The vote took place during the three-day Trades Union Confederation (TUC) annual conference to decide on the big issues for union campaigners to focus on. While media coverage of the conference focused on the headline-grabbing debate around Brexit and public sector pay, representatives from the country’s biggest unions passed a strong resolution on climate change.

Following devastating floods in the UK and President Trump’s plans to withdraw from the Paris climate agreement, the resolution called for the UK’s “rigged energy system” to be renationalised and brought back under democratic control. It also advocated for a mass programme of energy efficiency for the UK’s homes and public buildings, as well as a ‘just transition’ for workers affected by energy industry changes.

The last part of the six-point motion was a clause to “investigate the long-term risks for pension funds investing in fossil fuels, promote divestment, and alternative reinvestment in the sustainable economy.”

In two words – “promote divestment” – the UK trade union movement had officially endorsed divestment, or the removal of fossil fuel assets from investment funds (in this case, workers’ pensions), to fight climate change at its root cause, namely the extractive companies themselves. This has long been a contentious issue because unions traditionally favour ‘engagement’ as a tactic – the antithesis of divestment.

In a nutshell, if you think people power can change corporate behaviour by working with companies asking – questions at annual general meetings, shareholder activism, etc. – engagement is the answer. However, divestment campaigns paint companies and industries as being beyond redemption. Ties are cut, investments dropped and companies are made into social pariahs. Think big tobacco and Apartheid South Africa.

Economically, the TUC’s divestment vote was important. The value of workers’ pensions in the UK is now valued in the trillions of pounds. Of that, approximately £16 billion (US$20.94 billion) is invested in fossil fuels.

Historically speaking, the TUC’s divestment clause was no less significant. Firstly, it marks the first major national union federation to officially endorse divestment. But more importantly, this decision was made in Britain, where the most bitter union struggle in recent history was that of coalmining workers fighting against the state-sanctioned brutality of the Thatcher years. While the industrial legacy of their struggle continues to be fought over, the union movement is now assessing how best to remove any exposure of workers’ pensions to the fruit of today’s coalmine workers’ labour, underscoring just how far the climate debate has come.

In the United States, unions have gone even further, with union members integral to campaigns that resulted in two major Californian pension funds divesting completely from coal.

Yet in both countries, unions are split on divestment. Workers in affected industries are understandably fearful for their livelihoods. Meanwhile environmentalists point to the litany of evidence showing fossil fuel companies have not only ignored climate change but actively obstructed meaningful action.

Divestment: a short history

Given the union movement dates back to the beginnings of the industrial revolution, it’s important to note that fossil fuel divestment has been around for less than a decade. It really took off after US environmentalist Bill McKibben’s seminal 2012 Rolling Stone article, ‘Global Warming’s Terrifying New Math’.

McKibben’s premise was simple: humanity has agreed that two degrees of global warming is the maximum amount of global warming the world can handle. Extractive companies own fossil fuel reserves capable of at least four times that threshold. Therefore those reserves – of coal, gas and oil – must stay in the ground.

McKibben’s simple equation also created a massive financial headache if business was allowed to continue as usual. If we have to keep them in the ground, he said, then those companies and their reserves have been grossly overvalued. Borrowing a term coined by the UK think-tank Carbon Tracker Initiative, McKibben described a potential “carbon bubble” of stranded assets – future assets factored into our financial system yet unburnable if humanity is to survive.

“You can have a healthy fossil-fuel balance sheet, or a relatively healthy planet – but now that we know the numbers, it looks like you can’t have both,” he wrote.

The premise went viral and McKibben toured the US promoting divestment as a primary tactic to turn the fossil fuel industry into the world’s public enemy number one. Grassroots campaigns sprouted globally and the movement chalked up early wins with universities, churches and local councils pledging to go fossil free.

Copenhagen, Stockholm, Oslo, Washington DC, Berlin, Sydney and Ireland all made divestment commitments. Copenhagen in particular was a shining example, divesting itself of any company earning five per cent of its revenue from fossil fuel prospecting, extracting or refining.

Pension funds: boring but important

Yet divesting workers’ pension funds and their billions of collective fossil fuel holdings remains a tricky task.

In the US, unions were involved in campaigns to divest two major public sector pension funds: the California Public Employees’ Retirement System, or CalPERS –one of the world’s largest – and the California State Teachers’ Retirement System, CalSTRS. Following divestment endorsements from the California Faculty Association (CFA) and the California Federation of Teachers (CFT) in 2015, a Californian senate bill was passed effectively mandating CalPERS and CalSTRS to divest from the coal industry.

As of August this year, both funds have confirmed they no longer hold coal holdings. CalPERS in particular has drawn praise and fierce criticism for its anti-coal stance, the latter from right-wing politicians, libertarian pundits and unions covering oil and gas refineries, rigs and petrochemical plants.

European campaigners have also been making progress on pensions, Melanie Mattauch from the international environmental organisation told Equal Times.

“The Fossil Free campaign has managed to put the unethical business model of fossil fuel companies firmly on the agenda of pension funds across Europe, the United States and Australia. A big milestone was the EU’s decision last year to make it mandatory for occupational pension funds across the [EU], representing 75 million citizens, to incorporate environmental considerations and risks of climate change into their investment decisions.”

Two local councils in London (Southwark and Waltham Forest) have committed to divest their pension funds with almost £2 billion (US$2.65 billion) under management combined.

A role for union members

While it remains to be seen what the UK TUC’s divestment policy means on the ground, members from a range of unions were already driving divestment campaigns across the country.

Mika Minio-Paluello is an energy economist and campaigner from the London-based climate campaign group Platform. She is also a member of the UK’s second largest union Unison. She told Equal Times that said branch members were vital for driving the union’s thorough divestment policy internally – a significant feat given that Unison also represents workers’ in the gas industry and those working for major energy retailers.

Unison and GMB (another general trade union in the UK) members were also involved in the successful campaign pushing for the London Borough of Southwark to divest.

“The reality is that central trade unions don’t need official divestment positions for members to join campaigns, but by passing motions at national conferences the trade union is deciding to push it as a national issue and allocating resources to fight for it,” Minio-Paluello said.

Sam Mason, a policy officer with the UK’s Public and Commercial Services (PCS) Union, stressed the need for divestment to be part of a broader response to climate change.

“We see it as a good campaign but part of a range of things to help end our reliance on fossil fuels and extractivism. There is still huge nervousness about jobs and understandably this is a major concern for workers on the fossil fuel frontlines, particularly in the oil and gas sector.

“So we really need to work together to show that what we need is a ‘just transition’ and not just a redundancy package for workers, while also addressing the financial risk of stranded assets.”

It’s a position shared by the general secretary of the International Trade Union Confederation (ITUC), Sharan Burrow.

“A ‘just transition’ must include a plan that brings security for workers and communities, with a time-bound commitment to jobs, pensions and an investment in skills and redeployment. But if any company refuses to have a plan for decarbonisation and preserving jobs with a two-degrees impact or less, ultimately they are targets for divestment.”

A problem with capitalism

The big issue facing pension divestment campaigns, however, is the way such financial instruments operate within a system of capital that not only demands but legislates for maximum growth.

Sean Sweeney from the Trade Unions for Energy Democracy initiative says flatlining post-crash economic conditions are forcing fund managers to put short-term fossil profits ahead of long-term survival, largely because there aren’t many other options.

He noted that investment levels in fossil fuel development have fallen by more than US$200 billion annually, largely driven by the overproduction coal, oil and gas.

“But once inventories get depleted, the value of the shares that were sold due to divestment efforts will rise, because global demand for oil and gas is every year increasing. I am much more concerned about the need to build movement-based support for investment in public renewable power.

“Globally, investment in renewables is far below those necessary to reach climate targets. Pension funds would invest if renewables were publicly owned and done to scale. We need to provide that option. At the moment if Bill McKibben was a pension fund manager he would have a hard time choosing where he is going to put his money for reinvestment.”

McKibben himself has said that divestment is not just an economic play but a moral one. Like the anti-apartheid and tobacco campaigns, fossil fuel divestment is about robbing extractive companies of their social license and legitimacy.

In his Rolling Stone polemic, McKibben took no prisoners: “What all these climate numbers make painfully, usefully clear is that the planet does indeed have an enemy – one far more committed to action than governments or individuals. Given this hard math, we need to view the fossil-fuel industry in a new light. It has become a rogue industry, reckless like no other force on Earth. It is Public Enemy Number One to the survival of our planetary civilisation.”