Summary of Meeting with USS May 27th



Daniel Summerfield – Head, Corporate Affairs (Chair)

Simon Pilcher, Chief Executive of Investment Management

Naomi Clark, Head Investment Product management

David Russell, Head Responsible Investment

Joel Sawyer, Corporate Communications Manager

Ethics for USS

Paul Kinnersley, retired member from Cardiff University, co-ordinator for Ethics for USS

Sue Blackwell, ex of Birmingham University and deferred member

Andrew Jarvis, Lancaster University – has ESRC project on stranded assets

Martin Seigert, Co-Director Grantham Institute, Imperial – Climate Scientist

Brian Hoskins, Co-Director Grantham Institute, Imperial – retired member and Climate Scientist

Introductions and purpose of meeting and confidentiality

Everyone on the call introduced themselves and Paul thanked USS for the meeting.

Paul went on to recognise that the economic crash related to the COVID pandemic was likely to be presenting many challenges to USS and set out that the main purpose of the meeting was for Ethics for USS to hear more about the new approach to investment made as a consequence of the review of investment strategy conducted by Simon and that had been discussed briefly in the January meeting.  Paul said that Ethics for USS were also keen to hear how USS intends to rebuild from the current financial crisis in way that promotes sustainable investment.

It was agreed that the content of the meeting would be confidential and that Ethics for USS would produce a summary to be agreed by USS.

USS’s response to Open letter from Ethics for USS regarding Shareholder Resolution 21 at Shell AGM

David stated that it was USS’s view that it was preferable and likely to be more productive to not support this resolution and continue their policy of engagement with Shell as they thought it was producing helpful change.  David reported that USS had been a founder member of the UN-backed Principles for Responsible Investment and an active participant in the Climate Action 100+ group.  David argued that there was still a considerable market for fossil fuels and that Shell was performing better with regard to climate change than any of the other oil majors although it was not yet on track to meet the Paris Accord.  He also commented that if Shell were to move away from oil and gas production, the drop in production would only be taken up by other oil companies – such as Saudi Aramco.

Andrew put to David his own suggestion from the January meeting that the most pressing issue was not the holding of Shell and other fossil fuel investments per se but the funding of further exploration of fossil fuels reserves by Shell and other companies. He recalled David’s point that withdrawing from this specific form of investment would lead to the fossil fuel reserves becoming exhausted within a decade, which would align with the Paris roadmap. David indicated that he had read the Ethics for USS blog on this specific issue and that he agreed that a ‘transition not a cliff edge’ narrative was needed but did not comment on whether USS was funding further oil and gas exploration by Shell. He added that USS recognized the need to reduce CO2 emissions now and in the future and that Shell and other companies were investing in some trial Carbon Capture schemes in Norway (

 Martin commented that Shell were not moving fast enough given our knowledge of climate change and that many were now suggesting that oil companies be ‘broken up’ for example into Shell Oil Exploration, Shell Renewables and then investors could invest more specifically into certain activities.  David commented that Shell’s renewable business was now ‘percentage’ points rather than fractions of percentages as in the past and that he would reflect on the idea of Shell being broken up.

Brian commented that he had been at meetings on climate change with Shell for very many years and was aware that they were slowly shifting their position, but he felt that they were clearly doing insufficient to meet the requirements of the Paris Climate Accord and he felt that the policy of engagement was not working. He restated that we were very clearly ‘up against the clock’ regarding climate change and that there was no time for engagement without clear actions. Brian added that Shell should see itself and be seen as an ‘energy’ company rather than an oil and gas company if it was to have a long-term future.

Announcement of Exclusion categories for USS investment strategy

Simon announced that – with a two year transition period to divest from legacy investments – USS would exclude certain categories of investment that analysis showed were financially unsuitable due to political, societal and regulatory changes.  The excluded categories are:

Tobacco Manufacture

Manufacture of certain weapons – land mines, white phosphorus and cluster bombs

Thermal coal production – where coal represented >25% of the company’s revenue 

Simon stressed that USS needed to take a very long-term view and this was an attempt to position the scheme on a strategy for the very long term and to anticipate changes that may occur in the future. Simon felt that ESG regulations would impact on investment performance with even greater certainty as time goes by and also with ever greater certainty the longer the view you take.  He wanted to anticipate the impact of this and be more vocal about what USS was doing and prepared to do.  He said he felt that industries that ‘dumped’– poisonous chemicals into ground water, CO2 into the atmosphere, harsh conditions onto their workers – could get away with this in the short term but not on a long term basis (> 5 years) and again he wanted to protect the scheme from investing in such companies.  

Simon stated it was clearly in the interests of USS and the scheme that the requirements of the Paris Climate Accord were met and added that he was aware of the risks of USS holding ‘stranded assets’ and wanted to protect the scheme against this.

Martin asked if USS were also considering divestment from companies extracting tar sands since this was a very harmful way of extracting fossil fuels.  Simon replied that they were not currently planning to divest from tar sands but that he would review this category of investment.

Brian commented that USS should be anticipating societal changes rather than waiting for them to happen and reacting, as by then the investments would have lost value.

Andrew asked that, if USS was taking a ‘very long term view’ they should be able to articulate what they anticipated the portfolio would look like in 10 and 20 years time particularly with respect to its carbon intensive investments.

Simon responded that he was keen to position the investment portfolios in a way that anticipated lower levels of carbon intensity industry in the future. David added that USS doesn’t currently actively hold Total or BP shares in its DB fund, and that ESG issues will be built into how USS selects stocks in future.

Andrew made the point that emissions will always outgrow intensity and that the Paris road map has to get us to net zero by 2050 at the latest.

Simon recognised that there were profound negative implications for investments if there was significant climate change and that it was the task of the consumer to change their ways and governments are going to have an important role in that.

Daniel commented that USS’s engagement with companies didn’t begin and end with the AGM season and that they were in continuous dialogue with companies about a range of issues.  USS fully intends to hold companies to account on the ESG goals they set. David added that USS had had at least 6 meetings with Shell in the last 6 months. He said that energy companies are not in a position to transition to fossil fuel free activity by themselves and that a smooth transition required regulation and infrastructure.  

Brian commented that USS needed to be ‘ahead of the game’ or they would be too late (be holding stranded assets) and that in the next decade the fossil fuel sector would underperform even more than the previous decade.  Simon agreed that USS wanted to position the portfolio to anticipate such changes.

Daniel asked if Ethics for USS would like to make a contribution to the USS press release on June 1st announcing the above decision.  Paul said he would be happy to consider this and would get back to USS quickly.

Member questionnaires and surveys

Naomi reported that the planned members’ survey had been cancelled but that USS was instead planning an ESG focused survey with help from Rob Bauer from Maastrict University who is working on similar proposals for other pension schemes. Naomi said that USS would welcome views on the approach of this survey and the questions to be asked. She also stated that USS are working hard to ensure that  contact details for retired and deferred members are kept up to date

The timescale for the survey was being clarified and USS was aiming to make sure it took place at the best possible time.

Larger Meeting with USS members

Daniel stated that USS were still keen to be participate in meeting with a larger group of USS members to discuss the impact of climate change on the scheme and other matters of concern to members.  He assumed that this would have to wait until larger group could meet.

Paul responded that he thought such a meeting could easily be held using a virtual platform.

Future meetings

Daniel agreed that we should meet again in the future. At this stage he was unable to commit Dame Katharine Barker as she is yet to take up her post as Chair of the Trustees  (takes up role in September) however when she does take up this role he was prepared to put a request for a meeting from Ethics for USS to her.

Other business

David reported that USS were writing to UK government and EU Commission arguing for a ‘greener’ response to the COVID 19 economic crisis (see

Paul thanked USS again for the meeting saying that he felt we had shared objectives and that the main differences were over the speed of change needed.  He recognized that the announcement made today to this group and to the public on June 1st was a significant and exciting change of policy.  He would send the summary of the meeting to USS as soon as drafted.


Ethics for USS to send summary of meetings to Daniel Summerfield for review before distribution

Ethics for USS to send suggested questions for ESG survey to Naomi Clark

Paul Kinnersley and Daniel Summerfield to continue consideration of meeting with larger group of USS members liaising with ShareAction

USS to consider another meeting with Ethics for USS possibly with Dame Katharine Barker when she takes up her role as chair of Trustees in September.

Why is the UK’s largest pension scheme still investing in fossil fuels?

Article from Times Higher Education (June 10th 2020) by Bill Spence

The Universities Superannuation Scheme’s recent announcement that it will “exclude, and where necessary, divest” from tobacco companies, thermal coal and some weapons industries is welcome but long overdue.

Members may be surprised, for instance, that it took 70 years for the discovery that cigarettes cause lung cancer to translate into a decision from the UK’s largest pension fund by assets to withdraw its £190 million support for the industry. They may also be surprised that the fund, currently worth £75 billion, ever even considered financing the production of cluster munitions, white phosphorus and landmines.

But the really critical issue is that the USS continues to actively promote industries that are accelerating the climate emergency. The announced disinvestment in thermal coal is pure greenwash as the fund does not appear to have any holdings that would be affected. More revealing is what isn’t mentioned in the press release: the more than £1.3 billion that will remain directly invested in supporting oil and gas companies, plus large fuel-intensive infrastructure investments such as 10 per cent ownership of Heathrow Airport.

Keep in mind the context. The United Nations has given us little more than a decade to drastically reduce our use fossil fuels or risk much more disastrous global heating that we have already seen. In response, more than half of UK universities have committed to divesting from fossil fuels. Yet these divestments are dwarfed by their huge contributions to the USS – whose largest single holding, according to members’ group divestUSS, is an enormous £ 500 million in the oil company Shell.

The USS argues that the most effective way to ensure changes in climate impact is by engaging with such corporations at annual general meetings. But documents on the USS website itself show that in every single motion relating to climate change at Shell AGMs since 2010, the USS has voted with the company. This includes repeatedly voting against setting corporate targets in alignment with the Paris Climate Agreement; on the most recent occasion, in May, the USS explained that it “didn’t want to undermine [Shell’s] management team”.

USS CEO Bill Galvin presents this all differently. He writes that a “ground-breaking” example of the effects of USS pressure is Shell’s announcement of plans to reduce its carbon emissions by “around half” by 2050. But the 2018 UN climate report highlights that carbon pollution needs to be cut to zero by 2050 to keep warming to 1.5 degrees, while Shell is actually forecast to increase oil production by 38 per cent during the next decade. This at a time when the company is reportedly far behind its own very limited targets for investing in green energy and the oil industry as a whole commits just 1.3 per cent of its capital expenditure to low-carbon technologies.

In response to criticism of its investment strategy, the USS cites its key legal duty to underwrite future pensions. Its head of responsible investment argues that this rules out divestment from particular companies or sectors for ethical reasons alone.

But even discounting ethics, the accelerating climate crisis means that fossil fuel investments are not even a good medium-term bet. The world’s largest fund manager, BlackRock, is lowering its overall exposure to them, stating that “we are on the edge of a fundamental reshaping of finance”. Shell has recently cut its dividend – previously the largest in the FTSE100 – by a swingeing two-thirds. The huge USS investment in Heathrow already looked ill-judged in February, when the airport’s expansion plans were ruled illegal and in conflict with the government’s climate commitments. And the pandemic has shattered the airline sector, with experienced investors like Warren Buffet dumping all their vast holdings in it. All of this will surely give the USS’ new chair, Dame Kate Barker, much food for thought when she takes over in August.

While the USS appears rather cosy with companies like Shell, it struggles to engage with the members whose money it is investing. During the 2018 strike by university staff against plans to shift the USS to a defined contribution scheme, the fund’s managers failed dismally to persuade members of the validity of their financial assessments (their image was hardly helped when a professor of medical statistics who had consistently criticised the valuations was removed from the USS board last year). Staff were again on strike this year, with pensions one of the key issues; the current use of their money by the USS may not help in persuading them to increase contributions.

When the next annual climate crisis conference, COP 26, is held in Glasgow in 2021, the world’s eyes will be looking to see what leadership the UK has been showing. The country’s academics have been playing a leading role in understanding and reacting to the rapidly developing climate emergency; they deserve a lot better than having their pension savings used to support the businesses driving this crisis.

It is high time that the UK’s largest pension fund stopped the greenwashing and got clean out of fossil fuels.

Bill Spence is professor of theoretical physics at Queen Mary University of London.

USS response to Open Letter call for support on Shareholder Resolution

So USS have refused to support Shareholder Resolution 21 at Shell’s AGM on May 19th. Their response is below. This is of course incredibly disappointing and we will continue to press USS to provide us with a pension that doesn’t rely on carbon intensive investments. We are asking for a meeting with Simon Pilcher Chief of Investment Strategy at USS as we were promised in January. Thanks all for continuing support.

Here is USS’s response:

Thank you for your email of 10th May and for forwarding the petition by USS members calling for USS to support the shareholder resolution at Shell’s forthcoming AGM.

Upon careful consideration, we have decided to vote against this resolution which is calling for Shell to set and publish targets aligned with the goals of the Paris climate agreement. This is because we do not believe that there is a sufficiently large gap between what the company has already committed to compared to the Paris Agreement. Indeed, we believe that voting for the resolution would be counter-productive and potentially undermine the management team who has responded to engagement and made significant progress in its approach to climate change in recent years.

I detail below the reasons for our decision:

As you know, USS has been one of a number of investors (under the auspices of the Climate Action 100+) to engage with Royal Dutch Shell (RDS) over recent years to encourage the company’s alignment with the Paris goals.  We believe that such active engagement and stewardship is a key responsibility of being an asset owner.   The outcomes of the CA100+ engagements have included two joint statements between the company and investors, the latest of which was in April 2020.  The key points of the RDS commitments in its April 2020 statement are as follows:

  • RDS plans to become a net-zero emissions energy business by 2050 or sooner (covering scope one, two and three emissions)
  • An ambition to be net zero on all the emissions from the manufacture of all their products (scope one and two) by 2050 at the latest;
  • Accelerating Shell’s Net Carbon Footprint ambition to be in step with society’s aim to limit the average temperature rise to 1.5 degrees Celsius in line with the goals of the Paris Agreement on Climate Change. This means reducing the Net Carbon Footprint of the energy products that Shell sells to its customers by around 65% by 2050 (increased from around 50% as stated in 2018), and by around 30% by 2035 (increased from around 20%);
  • A pivot towards serving businesses and sectors that by 2050 are also net-zero emissions

USS supports the position that there needs to be a transition to a low carbon future, a process by which oil and gas companies can achieve the Paris goals.  This transition will require the use of fossil fuels for the foreseeable future as policy makers set the framework for a low carbon future, society shifts its preferences, and the use of low carbon alternatives grows to replace existing energy sources.  RDS has made a commitment to align with the Paris climate agreement (beyond most companies in the sector) including targets and realignment of remuneration to incentivise this shift.  They have also committed to working with the users of its products (responsible for 85% of emissions) to develop lower carbon alternatives. We do not believe there to be a large gap between the company and the requests made by the resolution.

In summary, USS supports the approach which RDS is adopting and, as a result, the scheme will not be supporting Resolution 21 as we believe that it would send the wrong message to management and would be counter-productive to our active engagement approach which has made significant progress with the company towards it meeting the Paris-aligned climate targets.

I know this will come as a disappointment to you and your supporters but please be assured that, as long as we continue to hold Shell in our portfolio, USS will monitor carefully the actions of Shell to ensure that they adhere to their commitments and will continue to engage robustly with the board and senior executives on a regular basis.

Kind regards

Dr Daniel Summerfield

Head of Corporate Affairs

USS, Climate and Shell AGM May 19th 2020 Resolution 21

 Ethics for USS are working with others to support Resolution 21 at the Shell AGM in May. The letter below – signed by 405 USS members – many of them senior academics – from 35 UK institutions has been sent to USS on May 10th. We will publish their response when received.

We call upon USS to vote for Shareholder Resolution 21 at the Shell AGM on May 19th 2020. Resolution 21, relating to climate change, can be read in full on page 6 of Shell’s AGM notice

Currently USS has approximately £500 million invested in Shell and therefore the views of USS members and USS institutions deserve careful consideration with regard to the USS vote. In 2017, 2018 and 2019 USS voted against similar climate change proposals. 

Resolution 21 calls on Shell to set and publish targets aligned with the goal of the Paris Climate Agreement to limit global warming to well below 2 °C above pre-industrial levels; that these targets need to cover the emissions of the company’s operations and the use of its energy products (Scope 1, 2 and 3); that targets be short, medium and long term and reviewed regularly in accordance with the best available science. The Resolution requests that targets are based on quantitative metrics such as greenhouse gas intensity or similar metrics and that annual reporting includes information about plans and progress to achieve these targets.

Shell Directors want shareholders to vote against Resolution 21 describing it, on page 7 of Shell’s AGM notice, as ‘unnecessary and potentially counter- productive to Shell’s efforts to support society in meeting the goals of the Paris Agreement.’ The Directors claim that their current and planned actions are a sufficient response to the threat of climate change. We note that Shell is continuing to drill for gas and oil around the world and continuing to look for new reserves of fossil fuels. In addition Shell is failing to meet its own green targets. 

The IPCC is clear. ‘The annual increase in global energy use is greater than the increase in renewable energy, meaning that fossil fuel use continues to grow. This growth needs to halt immediately’. Shell’s current approach is accelerating global climate change.

Failure to meet the Paris Climate Agreements will result in social and economic disruption that will have a severe negative impact on pension funds. It is therefore the fiduciary duty of USS and its trustees to support this important motion at the AGM. In addition over half of UK universities have divested from Fossil Fuels, with increasing numbers declaring climate emergencies. It is clearly in members’ interests for USS to vote in support of Resolution 21. We ask USS to inform Paul Kinnersley, retired USS member and co-ordinator of Ethics for USS, of USS’s voting intentions and rationale by May 15th. Paul wrote on this matter to USS Head of Corporate Affairs on February 27th but has yet to receive a response.

How should USS divest

Some thoughts from members of the Ethics for USS team (Andrew Jarvis, Keith Pitcher, Ceri Sullivan, Paul Kinnersley and Jay Ginn)

We need an energy transition, not a cliff

Here we are, pension owners with Shell as the primary asset securing our retirements, along with plenty of other high carbon investments in the USS portfolio. For a while now we have witnessed either ambivalence or embarrassment when members are presented with this information. We also understand the recent calls by some to immediately ‘divest’ from these holdings, but our response needs to acknowledge we have to build the low carbon future we want and need and how we behave as responsible investors plays a critical role in this. Like it or not, this low carbon future is built using our current fossil fuel endowment, and the Paris Agreement recognises this fact. This is why it is called an energy transition rather than a cliff. If so, our strategy should not be wholesale and immediate divestment from our fossil fuel holdings, but rather progressive divestment allied to wise re-investment of the proceeds from using fossil fuels.

Although it is the biggest private pension scheme in the UK, USS is small on the world stage. However, it can show genuine leadership by executing its fiduciary duty in ways that reflect the needs of the energy transition. Adopting a proactive strategy would certainly mark a significant and meaningful departure from the somewhat reactive strategy USS currently deploys in this space centred on using the global portfolio of Nationally Determined Contributions as a compass to follow. That strategy could easily result in a significant proportion of members’ investments becoming stranded by a rapidly changing political landscape.

We need to start with immediately preventing all future investment by USS in the development of any new coal, oil and gas reserves, because the there is no more head room in the Paris Agreement for expanding the drilled reserve. Starved of investment, Shell’s oil and gas reserves should deplete within about 10 to 15 years i.e. well within the 2050 time horizon called for by Paris. Currently Shell invests approximately three quarters of its one billion dollar R&D budget on developing its oil and gas business, in addition to buying up new reserve prospected by third parties. This suggests USS’s strategy of shareholder engagement to change Shell’s practices has had very limited effect. Actively withholding investment is likely to speak far more meaningfully, and if Shell continue drilling then USS should wholesale divest. 

If drilling stops, USS could wind down its position in its fossil fuel holdings in line with the required exhaustion of the the reserve over the next decade i.e. by 2030 USS should hold no such assets. Again, if Shell fail to honour this climb down then USS should wholesale divest. Of course USS will need to find alternative holdings to replace the likes of Shell and the responsible thing to do would be to invest in growing low carbon energy providers so that they can fill this space. This is not only responsible with respect to climate risks, history has shown us that energy investments appear to have the kind of return characteristics investment-based pensions demand. Over the last decade we have seen significant improvements in technical and economic performance in renewable energy technologies. These, coupled with emerging policies for renewables to replace fossil fuel usage in energy generation, heating and transportation, provide real opportunities for USS to realign its investments at scale.

Of course, if Shell is willing to now exclusively invest in developing carbon free energy sources, in the process turning itself into an exclusively renewables provider by 2030, then it could remain a primary asset in the USS portfolio. It’s relatively poor track record to date argues against this, but the scale of the required transition means we shouldn’t disregard the likes of Shell from playing their part in the transition. Similarly, the members should be encouraged to source their energy in line with this strategy to help provide the required demand.

This strategy causes us to reflect on how other USS holdings are associated with consuming the remaining fossil fuel endowment without contributing meaningfully to the transition. Of these Heathrow is the biggest and most notable example. It also suggests USS needs to use better the influence it does have in the sector to help create the necessary momentum, something we should be demanding as members. Pensions are now up there with governments as primary sources of the investments that shape the future. One would hope that University pensions would lead on shaping this future for the better.

Meeting with USS Responsible Investment Team

We had an interesting and informative meeting on Jan 16th and the plan is that we should meet again during the early summer. These are the agreed actions:

USS will:

1 Review the presentation of risks of ethical investments in newsletters and on the website

2 Send examples of the survey questions used when seeking members’ views to Ethics for USS along with draft future questions for comment

3. USS to consider how views on responsible investing from deferred and retired members could be heard.

4. Organise a meeting between Ethics for USS, Simon Pilcher, Chief Executive of Investment Management and Naomi Clark, Head of Investment Product Management on how plans for investment strategy are developing in relation to the Climate Emergency

5. Consider appearing at a discussion about responsible investing with a wider group of USS members.

Ethics for USS will:

1 Discuss with ShareAction the proposed meeting in 5 above

2 Comment on survey questions sent to them and respond to other requests from USS on the presentation of information on the website