Question reference: S4W-23915
- Asked by: John Finnie, MSP for Highlands and Islands, Independent
- Date lodged: 7 January 2015
-
Current status: Answered by John Pentland on 21 January 2015
Question
To ask the Scottish Parliamentary Corporate Body what consideration it has given to the exposure of the Scottish Parliamentary Pension Scheme to the so-called carbon bubble risk described in Scottish Environment LINK’s report, Scotland and the Carbon Bubble, and whether it is confident that the scheme's managers are correctly valuing its investments in oil and gas producers.
Answer
The Trustees of the Scottish Parliamentary Pension Scheme (SPPS) appointed Baillie Gifford as Fund Manager for the scheme and have delegated the responsibility for day to day investment management to them. The pension contributions are invested in 'pooled' funds (i.e. the SPPS is one of a number of investors in the funds) therefore under these arrangements the SPPS does not directly own any stocks and therefore cannot direct investments.
In light of the publication of the Scottish Environment LINK’s report, Scotland and the Carbon Bubble we brought the report to Baillie Gifford’s attention and asked them to comment on it and explain their investment strategy in terms of oil and gas producers.
Baillie Gifford look to the companies they invest in to be flexible and responsive to the global economy and emerging environmental and social trends and pressures. They are looking to companies with exposure to hydrocarbons to:
Have targets to reduce their own emissions over the long term (20-30 years);
Disclose their interaction with policy makers;
Structure asset portfolios so that they are resilient to a transition to a low carbon economy.
Baillie Gifford believes there is a strong argument and responsibility for investors to be active in the discussion, not by divesting but by being socially and environmentally responsible and looking for a global solution, by engaging with regulators, companies (within and outwith the hydrocarbon sector), and their clients.
In terms of the SPPS’ exposure to fossil fuels, the scheme currently has 3.64% exposure to the oil and gas industry (globally, via both producers and services companies) through its investment in the managed pension fund and 0.16% via the diversified growth fund (so a total exposure of 3.8%). The scheme also has about 0.75% exposure to renewables through the diversified growth fund. The weighting to oil and gas in the managed pension fund has come down significantly in the last five years, from just over 11% to just over 5% today.