Agenda item

The following Notice of Motion submitted to the County Council by the following Councillors have been referred to the Investment and Pension Fund Committee in accordance with Standing Order 8(2) for consideration, to refer it to another Committee or make a recommendation back to the Council:

·         Divestment from Pension Scheme (Councillor Hodgson)

A briefing note is attached (Report of the Director of Finance and Public Value, DFP/24/122).

RESOLVED that the Council be recommended to:

(a) Express solidarity with the innocent people directly affected by the ongoing

situation in Israel and Gaza;

(b) Support the engagement activity undertaken on behalf of the Devon Pension Fund by the Brunel Pension Partnership with companies operating in high risk areas including Gaza and the West Bank to use their influence to promote positive human rights outcomes;

(c) Support the exclusion from investment portfolios of companies manufacturing controversial weapons (cluster bombs, biological and chemical weapons, antipersonnel landmines);

(d) Affirm the inclusion in the Pension Fund investment strategy of the allocation to the Global Developed Paris Aligned Equity Fund, as part of the commitment to work towards net zero investment portfolios; and

(e) Have officers and members engage in conversations with Brunel representatives and other pool members on ensuring that the UN Guiding Principles on Business and Human Rights, as set out in paragraph 3.10 of the report, are fully reflected in investment policies.

Councillor M Lowry declared a personal interest in this item by virtue of being an ex-employee and current shareholder of Babcock International Group, who he was in receipt of a pension from.

In accordance with Standing Order 8, Councillor J Hodgson attended the meeting and spoke to this item.

This Notice of Motion had been submitted to the County Council by Councillor J Hodgson and had been referred to the Investment and Pension Fund Committee in accordance with Standing Order 8(2) for consideration, to refer it to another Committee or make a recommendation back to the Council. The notice of motion is recorded below:

Further to withdrawing over £2 million in investments from companies selling arms to Israel. Devon County Council now commits to investigating withdrawing the £84 million that remains invested through its investments and pension funds in such companies, including Rolls Royce (£1,951,241), Barclays Bank (£12,889,533), BAE Systems (£4,969,449), and Babcock (£360,850).

Devon County Council seeks immediate withdrawal of these investments, particularly in light of the tragic loss of over 20,000 children in Gaza. Our pension fund should not support activities contributing to such atrocities.

Devon County Council seeks to fully divest from these companies and to uphold values of peace, justice, and ethical responsibility.

The Committee considered the factual briefing note on the matter (the Report of the Director of Finance and Public Value (DFP/24/122)) which briefed members on the motion and referred also to a petition received by the Council with approximately one thousand signatories that was in support of the motion.

The report addressed an £84 million investment, referred to in the motion, by the Devon Pension Fund in companies that sell arms to Israel. It was highlighted that this seemed to be based on figures from 2021, since when significant changes to the Fund’s investment strategy had been made. The report also referred to the Global Paris Aligned Fund which excluded certain companies including on the basis of the manufacture of controversial weapons, which the report defined.

Also referred to was the UN Guiding Principles on Business and Human Rights as a framework on engaging with companies doing business in high risk regions, including Gaza and the West Bank.

Officers advised, in reference to the report, that the Devon Pension Fund was not directly invested in the companies concerned, and that it would not be possible to divest the shares. Additional exclusions from the Paris Aligned Fund could be requested; however this would present challenges as the Fund’s investments were based on a formula and had other investors, not just the Devon Pension Fund.

It was further explained to members that the Fund is a passive equity investment; this means that investment decisions are algorithmically dictated, and that there were no passive options currently available via Brunel that would omit the companies at issue. Moving to an active equity investment would mean higher fees, as these involve more of a human decision-making element, and possibly more risk of the Fund losing money.

Councillor Hodgson, who had submitted the Notice of Motion, referred to the destruction and loss of life resulting from the crisis in Gaza. Councillor Hodgson acknowledged the Committee’s duty to ensure investment return for Pension Fund members and the complex nature of the Fund making it difficult to divest, but referred to the destructive impact of the Fund’s investments that contributed to arms sales to Israel, and queried whether it being difficult to divest was a justification. Councillor Hodgson felt that the ‘business as usual’ approach was actively harmful in this respect and referred to a London borough, and other authorities, that had – or were in the process of – divesting from companies that contributed armaments to the Israel-Palestine conflict.

Members of the Committee referred to the difficulty of divesting, with some questioning the rationale behind a decision to divest. A member argued that to divest from a company only separates oneself from the problem; the shares still exist to be bought by someone else, and it would rid the Fund of the position – as a shareholder – of possibly having some role in lobbying companies to reduce their involvement in arms production.

Also referred to by members was a shift in the Fund’s investment strategy over the few years prior which demonstrated a consideration of relevant social, political and environmental issues, including climate change and controversial weapons.

A member commented that the investment rules of the passive investment fund already excluded certain companies such as those heavily involved in fossil fuel extraction and tobacco production and felt that it should therefore be possible to exclude companies that, for instance, sell to governments that have been subject to certain judgements by bodies such as the International Criminal Court (ICC). It was noted by another committee member that Israel had not been found formally guilty of war crimes or genocide, so that, depending on the wording of any such regulation were it to be introduced, companies selling arms to them may not necessarily be excluded from investment.

There was comment on the role of the Investment and Pension Fund Committee, in particular their key role in looking after the financial interests of those that contribute their money to the Fund. A member referred to the petition submitted, noting a number of non-Devon signatories. This member felt that, on the basis of consulting with Fund members, to divest from such companies was not in line with the views of these members who consistently expressed having a secure and well-performing pension as a priority. It was argued that the Committee should not impose the personal views of some on the Fund in trying to dictate investment decisions.

Another member commented that making decisions in the public interest was, on their understanding, in line with the Council’s fiduciary duty, and that, although protecting the investments of scheme members was vital, it was not the only consideration for the Committee.

It was expressed that pushing for discussions with Brunel and pool members would be pertinent in light of the controversies around the Israel-Palestine conflict and related investments, as the Committee naturally did not wish to be supporting war crimes. In relation, the UN Guiding Principles on Business and Human Rights, referred to in paragraph 3.10, were referred to as being a positive set of guidelines that the Committee should aim to adhere to.

It was MOVED by Councillor Trail, SECONDED by Councillor Bloxham and

RESOLVED that the Council be recommended to:

(a) Express solidarity with the innocent people directly affected by the ongoing

situation in Israel and Gaza;

(b) Support the engagement activity undertaken on behalf of the Devon Pension Fund by the Brunel Pension Partnership with companies operating in high risk areas including Gaza and the West Bank to use their influence to promote positive human rights outcomes;

(c) Support the exclusion from investment portfolios of companies manufacturing controversial weapons (cluster bombs, biological and chemical weapons, antipersonnel landmines);

(d) Affirm the inclusion in the Pension Fund investment strategy of the allocation to the Global Developed Paris Aligned Equity Fund, as part of the commitment to work towards net zero investment portfolios; and

(e) Have officers and members engage in conversations with Brunel representatives and other pool members on ensuring that the UN Guiding Principles on Business and Human Rights, as set out in paragraph 3.10 of the report, are fully reflected in investment policies.