The £75 billion Universities Superannuation Scheme (USS) – the UK’s largest private pension scheme by assets – on Monday announced plans to exclude and divest from “companies in sectors that have been deemed financially unsuitable for the pension scheme over the long-term.”
USS said: “These are: tobacco manufacturing, thermal coal mining (the mining of coal to be burned to create electricity), specifically where this makes up more than 25% of revenues, and companies that may have ties to the following industries — cluster munitions (a form of explosive), white phosphorus (a chemical which self-ignites on contact with air) and landmines.”
The USS has more than 400,000 members and has roughly £1 billion invested in fossil fuels, £400 million invested in tobacco and £200 million in arms manufacturers.
“This statement marks the first time that USS Investment Management has officially announced its position on exclusions and comes at the end of a detailed review of the long-term financial factors associated with investing in certain sectors,” added USS.
“It concluded that the traditional financial models used by the market as a whole to predict the future performance in these sectors had not taken specific risks into account.
“These included changing political and regulatory attitudes and increased regulation that USS Investment Management consider will damage the prospects of businesses involved in these sectors in the years to come.”
USS Investment Management CEO Simon Pilcher said: “This is a major development for us and one that will balance both keeping the financial promises made to hundreds of thousands of members in the higher education sector, with investing in a responsible way over the long-term.
“The exclusions we have announced today will be kept under review and may be added to over time.
“As the majority of USS’s assets (around 75%) are invested directly by USS Investment Management, we will have a great deal more control over this process than other pension schemes, and where we work with external managers, we will work diligently with them to implement our conclusions via their products.”
Catherine Howarth, chief executive of ShareAction, said: “After many years of USS closing its ears to members’ views on the scheme’s investments, it seems new leadership at USS is once again listening.
“This will greatly help to restore trust in USS at a time when it is badly damaged.
“There is much further to go with this process, and we hope USS will look now to follow other large UK schemes in establishing a robust new approach to regularly ascertain the views of members on investments held for their benefit, building members’ preferences into the scheme’s stewardship policy as well as taking further, bold steps to halt investment in fossil fuels.”