By John Wimperis, Local Democracy Reporter: A major pension fund has voted to continue to invest in the arms industry as only 42% of its members wanted it to stop.
The Avon Pension Fund — which has 135,000 members in mainly public sector jobs across the former county of Avon — was the first in the country to survey its members on divesting from the aerospace and defence sector. The fund has been under pressure to divest from companies involved in the arms trade after some members warned their pensions were being used to ‘fund human rights abuses by Israeli forces in Palestine’.
As the Avon Pension Fund committee met on December 12 in Bath’s Guildhall to vote on the issue, members of the public attached images of children killed and suffering in Gaza to empty seats in the council chamber as they urged the committee to vote to divest. But councillors said it could be unlawful to do so because there was not enough support from the people whose pensions are in the fund.
The £6bn pension fund has £18m invested in 20 companies in the aerospace and defence sector, including some companies that sell weapons to Israel but excluding those which produce “controversial” weapons such as cluster bombs and anti-personnel mines.
The committee’s legal advice said that to make an investment decision for non-financial reasons, it needed to be satisfied of two things: that it would cause no “significant financial risk and financial detriment” and that there was good reason to believe that the scheme members would support the decision. Councillors were told their decision would be “unlawful” if both conditions were not satisfied.
Divesting was estimated to cost just under £1m in additional administration costs on top of the current £30m annual cost of the fund. Although several councillors said this additional cost would not be a “significant” detriment, most councillors agreed there was not enough support among the scheme’s members to legally defend divesting.
The survey carried out in September had found that 74% of the fund were concerned that the products made by these companies may be used to harm civilians. However, only 42% supported divesting, while a slightly higher 47% supported continuing to invest in the sector. 11% were unsure.
Committee member Fi Hance, Green councillor for Redland on Bristol City Council, told the meeting: “I am probably not alone in the room in being deeply disappointed in the result of the survey — but to disregard it simply because I don’t like the outcome, I don’t think is right. To be clear, I personally do not support investment in the arms industry.
But she added: “I don’t believe the role of a politician is to set aside the law when it suits them because they don’t agree with the outcome.” John Leach, Liberal Democrat councillor for Walcott on Bath and North East Somerset Council, however, said he did not have confidence in the survey and would vote to divest. He said: “I don’t think it was unbiased.”
The committee also heard from five public speakers, including members of the fund, who all urged it to divest. One speaker told the committee: “At most the results show a membership which is divided, uncertain, and increasingly conscious of ethical implications of defence sector investments.
“The 42% figure is too substantial to dismiss, especially when this group includes a clear majority of women and members under 45. You cannot reasonably conclude that members support the status quo.”
Another speaker held up two images of a young girl in his family who had been killed. One photograph showed her smiling at the camera. The second showed her body wrapped in white fabric. Urging the committee to divest, he said: “Because something is legal or unlegal, doesn’t make it ethical.”
The committee voted 8-2 to continue investing in the aerospace and defence sector, but added a clause to note the strength of views expressed by members of the fund and communicate them to Local Pension Partnership Investments (LPPI) to inform the fund’s investment policies. LPPI is a pool of pensions which the Avon Pension Fund is joining as part of government reforms.
Vice chair of the committee George Leach (Liberal Democrat councillor for Keynsham North on Bath and North East Somerset Council) joined John Leach, who is no relation, in voting against. The two Green councillors on the committee, who were among those that voted to continue investment, said in a statement that they were “bitterly disappointed” by the result of the member survey but that it was not in the gift of the committee to overrule it.
Joanna Wright, who represents Lambridge on Bath and North East Somerset Council and had called for the clause noting member’s views to be added, said: “With a heavy heart, whilst we do not personally believe that investment in the arms trade is ethically or environmentally justifiable, we have to accept that the survey did not meet the legal threshold to change the funds investment policy.”
Ms Hance added: “We have been contacted by a great many scheme members who are horrified that their pensions are being invested in the aerospace and defence industry. We are dismayed that we have been unable to secure the change we all had hoped for but would like to thank campaigners for their hard work and their dignified and moving contribution to this debate.”
Chair of the Avon Pension Fund committee, Toby Simon, said in a statement after the meeting: “Committee members recognised that this is a difficult and sensitive issue, which is why the committee sought member views through a survey, sought further legal advice, and has taken its time to reach a decision. Committee members showed their empathy with the many different and sometimes strongly-held views of stakeholders.
“The committee has met and decided its approach, which is to remain invested in the aerospace and defence sector. We recognise that some stakeholders will be disappointed with this decision, but the committee believes it is the right decision given the further work undertaken.
“We note the strength of stakeholder views and agree to communicate them to our new investment pool, Local Pension Partnership Investments, which we will join in April, to inform their investment policies.”
Mr Simon, who is a Liberal Democrat councillor for Bathwick on Bath and North East Somerset Council, added: “The fund takes all member views seriously and, in reaching a decision, the committee has balanced those views with its wider fiduciary duty, legal advice, financial considerations, and the wider regulatory context with the evolution of pooling. The committee is grateful for the time taken by members to respond to the survey and for wider input received from stakeholders.”
20,000 randomly selected members of the fund were contacted by email to take part in the survey, with a response rate of 9.5% — which is double the expected response rate for similar surveys. The survey’s responses were then precision weighted according to the demographics of the fund’s membership. The survey was designed to produce a “statistically robust sample” even with a lower response rate.
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