Shell pension fund members are challenging the management over climate risksShell pension fund managers are being queried over how they are protecting members' investments from climate risks. Photo: Jeff J. Mitchell/Getty Images

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By Ucilia Wang

A former Shell employee in the United Kingdom is challenging the managers of the company’s pension fund to prove they are protecting the fund’s beneficiaries by adequately managing climate risks in their investment decisions.

Christoph Harwood, who worked for Shell for eight years during the 1980s and ‘90s, said he has been trying for two years to get documents from the Shell Contributory Pension Fund, a separate organization from the oil company, that show whether the pension fund takes climate threats seriously.

He now says he is considering filing a complaint to the Pension Ombudsman, an independent agency set up by the government to resolve disputes for pension fund members. The agency’s decisions are legally binding.

“The pension fund is exposed to investments in fossil fuels, and because it’s a fossil fuel company, there’s another level of exposure. Those risks need to be addressed,” said Harwood, who worked in sales and marketing and crafting long-term strategies at Shell.

“In the last 10 years I’ve been working in environmental finance, so I’m aware of the impact of the low-carbon economy and the impact of climate change on the broader economy. I want to the pension funds to take climate change into account because it’s a major risk,” Harwood said.

Harwood said the Shell Contributory Pension Fund has been slow to provide more than basic information, such as annual reports, and that they don’t explain the fund’s approach to managing climate risks.

Harwood’s case is unusual, but many expect more of these kinds of cases, in which pension fund members demand more disclosure and actions from trustees on the financial impact of climate change.

“This is definitely an area of increasing concern globally,” said Alice Garton, head of the climate program at ClientEarth, a London-based environmental legal organization that is supporting Harwood in his pursuit of information from Shell’s pension fund. “We are talking to organizations in other countries that are interested in doing something similar.”

The U.K. is ahead of many other countries when it comes to recognizing pension fund members’ right to understanding how climate change plays a role in investment strategies. A law that will go into effect in October 2019 will require all pension funds to disclose how they manage climate risks. The new law will also require them to craft a statement that commits them to considering the views of their members on investment strategies.  

In the U.S., members of an ExxonMobil pension fund sued the company under the Employee Retirement Income Security Act, which aims to protect the rights of pension fund members. It didn’t go far and was dismissed by a federal judge in Texas in March.

In that ruling, Judge Keith Ellison said the plaintiffs didn’t show how Exxon and its executives kept share prices high by misleading investors about climate risks or whether Exxon accounted for regulations to reduce emissions and fossil fuel use in its disclosures to investors.

Since the ruling, New York Attorney General Barbara Underwood sued Exxon in state court for allegedly using a different set of numbers internally  than what it disclosed to the public to downplay the threat of climate change to its assets and financial outlook.

In Australia, a man is suing his pension fund, Retail Employees Superannuation Trust, for failing to protect his interests when it doesn’t consider the impact of climate change

Climate change hasn’t been a key consideration in the world of pension funds, whether they are for public or private. Some pension funds for public employees, such as NYC Funds, have vowed to gradually shed their investments in fossil fuels.

But pension fund trustees have largely bristled at efforts to compel them to divest or otherwise change their investment strategies. They say it undermines their duty to act in the best financial interest of their beneficiaries.

For example, the California Public Employees Retirement System, has fought efforts that required it to divest.

“An awful lot of trustees don’t understand climate change and think it’s a political issue,” said Chris Davis, senior advisor of the investment network at Ceres, a consortium of companies that promotes sustainable business practices.

Davis said that attitude may change when they begin to understand the financial risks involved. “They would be in breach of their fiduciary duty if they ignore it,” he said.