West Yorkshire Pension Fund outlines tougher stance on UK fossil fuel investments

West Yorkshire Pension Fund (WYPF) has been advised to place oil and gas supermajors BP and Shell on a potential pathway to divestment, as climate actions for the companies fall short of minimum expectations, a report has revealed.

BP and Shell represent the fund’s largest fossil fuel holdings, with the £19.2bn Local Government Pension Scheme fund, which belongs to the Northern Pool, investing £169m and £379m in the companies respectively.

The recommendation comes from a review by LCP into West Yorkshire’s investment approach to UK fossil fuel companies. In the report, LCP outlined a possible engagement process, including an assessment framework and escalation pathway. It noted that divestment in isolation is “likely to be ineffective”, but when combined with engagement, it could serve as an appropriate final escalation step.

The report proposed that the fund set clear minimum and ongoing expectations for fossil fuel companies, with divestment as an outcome if these are not met.

At the WYPF’s request, LCP assessed BP and Shell against a criteria of having a credible pathway to net zero alignment and undertaking activities to transition effectively to a low-carbon economy. The analysis found that both companies failed to meet all the minimum standards under the assessment framework.

As a result, LCP recommended that BP and Shell be earmarked for enhanced engagement, with the threat of divestment if minimum expectations are not met following engagement efforts by the WYPF.

WYPF’s largest holdings, based on apportioned Scope 1 and 2 emissions, also include Rio Tinto (£110.4m), AGL Energy (£3.6m), Glencore (£67.9m), Anglo American (£49.8m), RWE (£6.5m), Nippon Steel (£4.9m), Linde (£66.8m), IAG (£13.7m) and ArcelorMittal (£2.7m).