A large customer base in common

You may not know it, but you could just have become a stakeholder in how Barclays finances companies and in the process become a climate change activist.

Share Action has co-ordinated a group of organisations , including NEST to come up with a “clear and robust” plan to phase out investment in fossil-fuel companies that don’t contribute to the Paris Accord to reduce global emissions.  Others in the group are the Church of England Pension Board and Eden Tree Investment Management.

This is precisely the kind of activism envisaged by the DWP when inserting its amendment into the Pension Schemes Bill and expected  to be enforced by the Pensions Regulator as Big Government swings behind “Shareholder Activism”.

It’s been a long time coming…

Share Action (and other firms such as Minerva and PIRC) have been marshalling votes to get better governance into our boardrooms for some time, but this case seems to me a landmark. Barclays rank the 6th largest financier “fossil-fuel” companies,  and Europe’s biggest.

While other European banks have been tightening their lending policies and forcing change, Barclays “carries on regardless” of the changing state of the planet.

Share Action says there is gathering momentum behind the shareholder resolution and have good reason to be proud to be at its head.

But change is going to come.

What is interesting is NEST’s claim to be Britain’s largest pension fund. It isn’t by assets but it is by membership, NEST reckon by the end of the decade that one in three of Britain’s  workforce will have a NEST pension pot. When NEST votes, it votes the money of ordinary people, many of whom are Barclays customers.

Now it is up to NEST to explain to its members why it’s worth NEST spending time and money stopping Barclays exploiting what might be considered a commercial advantage it has over its rivals. I hope that Mark Fawcett as CIO and his dedicated team of ESG specialists will start talking to its membership of its voting behaviour.

There are two good reasons for this.

1. Many of its members haven’t a clue what NEST is doing with their money and need to become acclimatised to it being invested.

2. When they’ve got over the shock of being investors, it’s good to explain that they are responsible investors and that while in the short -term , missing out on some return from high interest pay fossil fuel companies, may mean less money in their pots, this will be compensated by the longer-term boost to their savings of being invested in (or lending to)  companies with a sustainable future

Aligning our interests

I support the DWP’s interventions to speed up the change in Pension Fund activism. This needs to be driven , for now,  by firms like Share Action, fund managers life Eden Tree and Trustees like the Church of England’s. But most of all, it needs to have the support of the members of our pension schemes. The pension pots of members in NEST, NOW, People’s Pension, Smart and the other workplace pensions are small, but the numbers are huge, they are what allow NEST to call  itself Britain’s largest pension fund.

Our interests are best served by reducing emissions and having a cleaner planet. Our interests are served by the behaviour of schemes like NEST which will eventually become the largest scheme in the country by assets as well as members.

If Barclay’s management doesn’t see a freight -train coming at it , it will find itself forcibly changed or even removed by activists representing not just NEST but its own customer-base.

NEST is not going off on one , it’s aligning our interests with our investments. Share Action is making it happen and it looks as if there are already 130 institutional shareholders who will be joining in.

This is why we need legislative change

The DWP’s amendment is far-sighted. It aims to provide tPR with the powers to ensure trustees have strategies and set targets to reduce carbon footprints of pension funds in companies that can make or break the Paris Accord.

There is a total alignment of interests between all in the investment food chain – even Barclays. In the long-term Barclays will suffer from lagging as it is today.

There are many, the PLSA included, who struggle to see how Government interventions can help. In a perfect world they would be right, markets would do the right thing by themselves.

But we don’t live in a perfect world and – left to their own devices – Barclays management would continue to hit self- created KPIs based on doing the wrong thing. In the short-term this would be profitable but in even five years time, the current lending policy looks unsustainable.

We do not live in a perfect world, Barclays are being stupid and the DWP will give the necessary kick up the jacksey to the many fund managers, fiduciaries and management boards – who currently think they can get away with it.

Practice what you preach.

When I park my Santander Cycle outside WeWork this morning, I will pick my way past six litre charabancs that have ferried in executives to talk to managers at Schroders and LGIM about how they intend to reduce their carbon footprint.

I will watch the “movers and shakers” being driven back to corporate HQs (usually within our low emission zone) and no doubt they will think they had a constructive meeting.

Not all executives arrive in the City by bus (Adrian Boulding read this blog on a zero-emissions bus)

Doing my bit for climate change. Here’s a pic of my regular commute to Shoreditch on top of one of Metroline’s all new all electric Route 43 buses. This shot especially for ⁦@henryhtapper⁩ pic.twitter.com/eC9WuFfFyL

— Adrian Boulding (@AdrianBoulding) February 24, 2020

I will know that the limo-taking executives have really cottoned on to the sustainability message when I see them getting off busses, emerging from tube stations or parking their cycles up in the rack!

If you want to know more…

If you would like to know more about how investors can reduce the impact of climate change, follow this link  – sent me by the brilliant Julia Dreblow