Pressure on Highland Council to 'stub out' unethical investments

HIGHLAND Council could review its stake-holding in tobacco, alcohol and weapons companies.

Opposition to such selections was spelled out by Ross-shire councillor Angela MacLean amid long running anger about the ethics of the local authority investing millions of pounds in such industries while also claiming to promote “healthy” lifestyles through council policies.

Over the past 15 years, a small band of councillors has registered opposition to widely perceived “unethical” investments but to no effect.

Independent fund managers are employed to get the maximum return. Recent figures showed the fund increased in value in 2016-17 by £31.1 million. As of last weekend, it was valued at £2,013,164,722.61.

Addressing colleagues on the audit and scrutiny committee, Cllr MacLean called for a review of investment strategy. She acknowledged the need to secure the best return.

But she added: “Some people are not happy with some of the investments and feel that perhaps if it’s invested in tobacco or arms or things like that, it’s not ethically responsible.”

She asked whether fund trustees had any say in the choice of investments.

The council’s investments change on a daily basis.

Recent examples of contentious choices include British American Tobacco (£14.1 million), liqueurs firm Pernod Ricard (£3.7 million), pubs chain Mitchells and Butlers (£3.4 million), Japan Tobacco (£3.3 million) and China’s second largest brewery, Tsingtao (£1 million).

The council’s finance director Derek Yule explained that an investments sub-committee reports to a pension board which sets the strategy.

“It is very difficult when some of the investment strategy seeks to invest in shares in companies not just in the UK but worldwide,” he said.

“Whilst I totally understand some of the ethical debate, it is very difficult to draw a line sometimes.

“You might take a view… would you invest in banks, for example? They might not be the best investment, anyway. But I use that as an example because banks will fund these companies.

“It’s a difficult balancing act but it’s certainly within your rights if you wished the pension board to look at the investment strategy.

“Fund managers are given guidelines to work to, so that would be quite legitimate for the council to do through the pension board.”

According to current policy, the fund “recognises that social, environmental and ethical considerations are among factors investment managers will take into account, where relevant, when selecting investments for purchase, retention or sale.”

However, it stresses that “the overriding consideration for pension committee members is their fiduciary duty to the scheme employers and scheme members”.

The Scheme Advisory Board, established up by the Scottish Government to regulate such public sector pension funds, recently obtained advice from legal counsel on the duty of pensions committees.

The guidance concluded that: “Pensions committees in Scotland owe a fiduciary duty to the scheme employers and the scheme members in general and specifically in relation to investment matters.

“Those duties should be exercised in the best interests of the beneficiaries and in relation to investment decisions, should aim to achieve the best financial position for the fund, balancing risk and return in the usual way.”