Each year USS produces a Task Force on Climate-related Financial Disclosures report. You can read the report here.
We have read the report and sent the observations below to USS Investment Management and the UCU appointed USS Trustees.
DivestUSS response to USS TCFD 2024
Context: rapidly increasing temperatures, inadequate emission reductions, accelerating climate related deaths, crop failures and food shortages:
World temperature reach hottest levels ever on Monday July 22nd 2024. The director of Copernicus, Carlo Buontempo, (said) that the world was now in “truly uncharted territory”1.
Scientists increasingly concerned that the world’s oceans are approaching the limits of their capacity to absorb heat. June 2024 was the 15th consecutive month that global sea temperatures were at record high2.
Methane emissions are rising rapidly. One of main sources of emissions is fracking3.
Income from farming in England down 19% last year after floods meant harvesting many crops was impossible. According to the Met Office, 1,695.9mm of rain fell in England from October 2022 to March 2024, more than in any 18-month period since 1836. Scientists have said climate breakdown is likely to cause more intense periods of rain in the UK4.
Forest fires surge to the highest levels since 2020, the worst year on record5.
The UK’s 2030 target to cut greenhouse gas emissions is at risk unless the country can rapidly deploy renewables, ensure nearly all cars sold are electric and fit heat pumps in 10% of homes6.
The US remains off track for the steep greenhouse gas emissions cuts promised by 2030 under the Paris accord despite the Biden administration’s green subsidies and new climate rules7.
We note that:
The TCFD report shows USS are ahead of the target for 25% emissions reductions by 2025. However the scope of the report remains limited with Scope 1 data only being available for 64% of assets and Scope 3 data only available for approximately 50% of assets. Only 45% of portfolio emissions from assets aligned with pathway of well below 2 degrees C.
USS recognise both the potential impact of climate change on portfolio returns and the need for urgent emissions reductions.
USS has reduced its major investments in fossil fuel companies (those in ‘top 100 public investments) however it still has many smaller holdings in high intensity fossil fuel companies including fracking, tar sands and shale.
USS has investments in many banks that are funding the expansion of fossil fuel resources – 16 of the top 20 banks funding fossil fuels including JP Morgan Chase (£ 72 million) and Bank of America (£ 33 million)8.
USS voted against the directors of the Bank of America and Barclays over concerns about risks associated with the transition to a lower carbon economy and the alignment of their business models and financing activities with the Paris agreement.
USS recognises that many universities are taking action to reduce emissions (TCFD 2024 p 22). Over 100 UK universities have committed to divesting from fossil fuels suggesting that USS’s continued holding of these investments is at odds with the views of their sponsoring employers.
Ethical fund continues to produce the best returns for members in the DC scheme9
Questions arising from the above
Does USS provide debt finance to fossil fuel companies? If so, how much to which companies and what are the plans for reducing this?
How does USS estimate the portfolio emissions from banks that finance oil and gas expansion? What steps will USS take when voting against the board of banks fails to produce a change in policy?
Given the urgent need to cut methane emissions, how can USS continue to justify its investment in Halliburton, one of the largest fracking companies in the world and hence a major emitter of methane?
USS has £ 151 million invested in Unilever and quotes Unilever as being a ‘corporate climate leader … now updating its Climate Transition Action Plan’. However Unilever has changed its plans to reduce the use of virgin plastics in response to shareholder pressure10. What steps will USS take now given that Unilever now no longer appears to be driving ‘global change’?
Our suggested actions for USS in 2024-25
Continue to reduce portfolio fossil fuel emissions and consider new target of ‘net zero 2040.
Publish levels of debt finance to fossil fuel companies.
Add fracking and coal tar extraction to thermal coal as excluded industries.
Exclude those banks identified independently as being in the ‘top 20’ of those that lend money or finance in other ways the development and exploitation of new fossil fuel resources.
Continue to vote against the boards of those companies that fail to have plans aligned with USS’s own targets of a 50% reduction of emissions by 2030.
References
1 Guardian 24/07/2024
2 Financial Times 24/07/2024
3 Guardian 30/07/2024
4 Guardian 12/07/2024
5 Guardian 09/07/2024
6 Financial Times 18/07/2024
7 Financial Times 23/07/2024
8 Banking on Climate Chaos – Fossil Fuel Finance Report 2024 https://www.banktrack.org
9 USS Quarterly Investment Report June 2024
10 Guardian 19/04/2024