Extinction Rebellion has raised concerns about the Surrey Pension Fund’s climate risk strategy, particularly its reliance on advice from consultant Mercer.
The group believes Mercer’s guidance does not adequately consider the financial risks tied to global warming in pension investments.
Extinction Rebellion staged a protest outside Mercer’s UK Pension Investment conference, urging pension funds to divest from fossil fuels and re-evaluate the advice they receive.
Their concerns stem from Mercer’s advice to the Local Government Pension Scheme (LGPS) Central, which manages £55 billion in retirement savings for one million UK Local Government Pension Scheme members, including Surrey Pension Fund.
A report by Professor Steve Keen and Carbon Tracker alleges Mercer and similar consultants underestimate the impact of global warming on portfolios, using models predicting minimal harm from temperature increases of 2°C to 4.3°C, in contrast to climate scientists’ more dire forecasts.
Professor Keen states in the report: “Global warming is not a minor cost-benefit problem that will mainly affect future generations, as the economic literature asserts, but a potentially existential threat to the economy, on a timescale that could occur within the lifespan of pensioners alive today. We are talking about the financial futures of millions of people.”
Campaigners from Extinction Rebellion and other groups rallied against what they view as risky investment advice that benefits fossil fuel interests.
Rob Noyes of Platform UK criticised this advice as contrary to climate science, endangering pension funds and the environment.
He said: “Consultants like Mercers are telling pension fund managers that global heating of 2.5 to 4 degrees will have minimal impact on their portfolios.
"This is highly unlikely, given the world would reach an average temperature it has not seen in millions of years. It’s completely contrary to any climate science – in short, it’s bad advice.
“We came along to Mercer's UK Pension Investment Conference today with advice of our own – don’t waste your money, or our climate, on such bad advice which puts at risk the pensions of thousands of hardworking local government employees.”
Jenny Condit, Godalming resident and Extinction Rebellion activist, added: “Extinction Rebellion’s ‘Cut the Ties’ campaign calls out those who enable fossil fuel interests. Today we took aim today at Mercer, investment and risk advisors to thousands of pension funds, including many of those who provide pensions to Local Government Pension Schemes.
“New research clarifies that Mercer – and others working in the same sector – grossly understate the financial risk related to climate change in pension investment portfolios.
“If only they would listen to actual climate scientists. Then they wouldn’t fail to include tipping points and other looming threats in their analysis.
“We are calling on Mercer to involve the current science in their scenarios and we saw today that many pension funds trustees were ready to listen.”
In response, Neil Mason, senior officer of the Local Government Pension Scheme, clarified Surrey Pension Fund’s commitment to achieve net zero by 2050 or sooner, aligned with UN and UK government guidelines.
He said: "The process to arrive at this target included commissioning Mercer, the fund’s investment consultant, to carry out bespoke research using Mercer’s updated models and considering the Fund’s current and future benefit liabilities and assets.
"The Surrey Pension Fund is not part of Local Government Pension Scheme Central pool, as was stated in the Extinction Rebellion press release, but pools its assets through Border to Coast Pensions Partnership (BCPP). BCPP also have a net zero target of 2050 or sooner. Their pathway to net zero is science-led and based on the Intergovernmental Panel on Climate Change, IPCC, Pathway 2.
"However, despite the best efforts by all researchers, the Surrey Pension Fund accepts that modelling climate change and the associated investment risks does include uncertainties, both in its nature and timescale. Therefore, the fund’s net zero target does not constitute a single decision point. The target will be regularly reviewed as models and evidence evolve.
"Meanwhile, the fund has been taking action in advance of these models. Since 2018, the fund has reduced its Weighted Average Carbon Intensity (WACI) by over 58 per cent for its listed equity exposure, invested in dedicated private market renewable energy funds and been a significant supporter of the BCPP Climate Opportunities Fund.
"It’s a balance of strong fiduciary duty, responsible investment decision-making, and having a real-world impact. A balance the Surrey Pension Fund takes very seriously indeed."