Three questions for USS and two disappointing answers

So we recently asked USS three questions and we have now received their answers:

Q. As a 10% owner of Heathrow Airport is USS supporting the building of a third runway despite the recognition that it would lead to a dangerous increase in carbon emissions and that further investment is risky as Heathrow could become a stranded asset

USS’s response- Since 2018, LHR has offset emissions to be carbon neutral for the energy used in terminals [since 1990 they’ve almost doubled the number of passengers whilst also making a 93% reduction in carbon emissions]. They are committed to working towards zero carbon emissions from their terminal and fixed infra by 2050 and to work with partners to deliver zero emissions at the airport. As part of the development consent process for the new runway, LHR will have to comply with the requirements of the Airports National Policy Statement in relation to carbon. This includes ensuring that expansion must not result in an increase in carbon emissions so significant that it would have a material impact on the ability of Government to meet its carbon reduction targets, including carbon budgets. LHR’s long-term aspiration is to make growth from the new runway carbon neutral. This would mean that growth in emissions from additional flights after expansion would be offset through carbon credits – resulting in no net growth in emissions. Their aspiration also applies to emissions from ground transportation for passengers and employees and the embodied carbon that would result from construction of our new runway. Heathrow has also signed Prince Charles’ Terra Carta initiative (  and is working with the aviation sector and government (it was in the national infra strategy) to develop sustainable aviation fuels which significantly reduce co2 emissions. Re: Stranded asset – Prior to COVID-19 Heathrow has been operating at full capacity for a number of years and there is significant excess demand from airlines to operate out of Heathrow.  A strong aviation sector is critical to the economic recovery in the UK and the UK’s aspiration to develop new trading links around the world.  We expect aviation demand to return in the UK but are committed to ensuring that growth in aviation is sustainable. We do not believe that decarbonisation and growth in aviation are mutually exclusive and are working hard with our co-shareholders and management team at Heathrow to deliver both.

Q. What is the current level of USS’s holding in British American Tobacco?  In June last year USS committed to exclude tobacco holdings from the portfolio.  However the USS website list of 100 top investments only reports the holdings as of September 2020 and continues to show holdings of £ 75 million in BAT.

USS’s response – Although we set ourselves a year two year target to divest from our tobacco holdings,  I am pleased to report that we have sold all our equity exposure in BAT and the residual credit investment will be gone by the next quarter. 

Q. What is USS’s view of the HSBC AGM shareholder resolution filed by ShareAction and others (combined US$ 2.4 trillion in assets under management) calling on HSBC to publish a strategy and targets to reduce its exposure to fossil fuel assets, starting with coal, on a timeline consistent with the Paris climate goal? Has the resolution been discussed by the trustees and if so, what was the outcome of the discussions?

USS’s response – The resolution does make some good points, and we have already attended one meeting with the company to discuss the resolution and associated issues.  However, the company has not formally responded or provided their proxy response so it’s difficult to take a voting position at the moment. We will keep this under review.

The answer on tobacco (Q2) poses the further question as to why USS can exclude tobacco but not fossil fuels from their portfolio. USS claims that the decision to exclude tobacco is based on financial not ethical grounds. We believe that future investment in fossil fuels is likely to be financially risky and that these investments should be excluded on the same grounds.

Ethics4USS is going to urge USS to meet with ShareAction (Q3) – since, if they are prepared to meet with HSBC, it seems reasonable that they hear the other side of the argument for this resolution.

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