n March 2017, Waltham Forest Council in London held £53.4m in investments in coal, oil and gas through its pension fund. Each of the 16,500 current and former workers who were members of the council’s pension scheme had more than £3,000 invested in fossil fuels. But this was about to change: the previous year, the council had become the first local authority in the UK to announce the divestment of fossil fuel holdings from its pension funds.

Divestment can mean the selling-off of stocks, bonds or funds for any reason, but it most commonly refers to the sale of assets that are seen as incompatible with long-term, sustainable investing. Climate campaigners see it as one of the best ways for big organisations such as universities, religious organisations or public bodies to stop funding fossil fuels. In the case of pension funds – which invest on behalf of people decades in advance of them drawing their pensions – the questions of environmental and financial sustainability are clearly linked.

But does it work?

Divestment is not quick or easy to do. It has taken Waltham Forest five years to reduce its investments in fossil fuels from 8 per cent of its pension fund to 0.5 per cent (the council says it is confident this figure will be zero by the end of March 2021). Clyde Loakes, deputy council leader, says phasing out fossil-fuel investments is “not as easy as you think”, even over several years.

“Pensions are complicated, and there are lots of risks in changing the direction of a pension pot. People want reassurance their investments are safe.” But for pension funds that want to invest in the transition to a clean-energy economy and ensure a decent return for investors, there is also the question of whether they could have more influence as shareholders.

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