Contributed by Doolittle

Forgive the parody click bait title but there actually IS a trick and it is probably one of the most effective things any individual can do to affect the outcome of the battle to change our economy from a fossil fuel based one to one based on renewable energy other than put solar panels on your home:

Write your pension fund administrator.

WHAT?! Yes, that’s right. Write to your pension fund administrator.

We could collectively mobilize TRILLIONS of dollars in assets this way!

(cont. below the fold w/ proposed sample letter to send to your pension fund manager)

The 300 largest pension funds in the world control about $14 Trillion in assets, according to the consultancy Towers Watson. This equates to almost half of the total amount held by pension funds globally, roughly $32 Trillion, which is a sizable portion of the total of all privately held assets. How pension funds invest this capital therefore has a large effect on the global financial markets. Most pension funds don’t hear much from their stakeholders. They tend to take conservative (small “c”) steps when addressing risks and looking for new investment opportunities. It tends to be one of those industries, for many reasons, where is it is better to fail conventionally than succeed unconventionally.

There is a large movement of university students working to divest from fossil fuels in their school’s endowments. These students’ futures are being mortgaged by the fossil fuel industry so why would they want to help them with investments from their endowment? At the same time, they want to use the endowment to help finance the industries that will not only provide the alternatives to fossil fuels but will be the main engine for jobs growth in the energy industry going forward.

The same logic applies even more explicitly for pension funds. We are all going to absorb massive costs from climate change impacts, $100+ per ton of CO2 Eq. emitted according to the most recent Nicolas Stern report for the UK government. Yet, through our pension funds, we are financing those industries that are making the problem worse. The long term risks to our pensions is immense as insurance companies pull back from insuring climate risk and the general economy therefore starts taking bigger hits.

In addition, an economy dependent upon fossil fuels will start to see ever increasing drag on economic growth as the average cost of oil production (even if that production increases due to fracking, tar sands, etc.) rises, taking all the profits from economic growth with it. Therefore, it is ESPECIALLY important to our long-term economic survival that we change what the investments our current economy makes. Unless we’re one of the few billionaires running around it seems like our small pools of capital, if we even have them, aren’t going to amount to a hill of beans in the larger scheme of things. However, as the numbers above show, we collectively control a huge amount through our pensions.

Unfortunately, the people who control this capital for us, for the most part, never hear from us! Now is the time to change that and I’ll tell a little bit more about why this is such an effective approach.

Recently, my job changed and I started working with pension fund administrators to try and implement various strategies based around more sustainable/ethical investment. These strategies aren’t just based on screening out investments in, say, tobacco or landmines or companies accused of child labor, but are often much more sophisticated model-based efforts to determine where long term thematic risks lie across the entire economy and arbitrage them out. Two key themes have become a core part of this effort:

One, the overall risk posed by climate change impacts and the reaction to it from governments and the markets, and

Two, the concept of “stranded assets” – that as regulation and disruptive technologies (like alternative energy) attack the market for carbon intensive fuels, these assets may become “stranded”, i.e. obsolete and unsellable or only saleable at a level far below the original investment price. This becomes especially important as all the new fossil fuel technologies require large amounts of constant capital investment to become viable and also require high energy prices in most cases to remain profitable. Pension funds, through equity and bond purchases, are providing large amounts of this capital. (Google “Carbon Tracker” for excellent background information on this…)

This where you come in. Pension funds, in most cases, don’t hear much from their stakeholders. The administrators are faced with a wide array of challenges stemming from the slow global economy to bring in enough capital from future retirees and grow it fast enough to pay out to those retiring today. The pension industry is heavily dependent on outside consultants to determine how the money is invested and what the long-term strategy will be. Many administrators will tell you that they wish they knew more about how their stakeholders wanted their money invested but with limited resources and often thousands or tens of thousands of members, they have a hard time getting coherent feedback.

Conversely, many people don’t know who is managing their pension, or how the whole thing works. There are only so many hours in the day and if you’re not an investment professional, or really dedicated to the subject, most people figure that making good investment decisions is what the administrators get paid for, so most people don’t communicate on these types of issues even when they are quite concerned and informed. This state of affairs is exemplified by the fact that nearly all pension funds’ biggest investments are through default funds as opposed to more actively chosen investments.

Therefore, even a single letter to the administrators from one of you can have a very big impact in how they view this issue and help to break the conservative mindset that tends to rule in pension funds. Administrators are legally required in many instances to provide information when requested, and are also responsive to the views of those who pay into the fund. You pay their salary after all.

We NEED to make sure they know that we care about the issue of climate change and understand it to be a huge risk to our collective futures. They need to hear from us that financing fossil fuels is not only a dangerous decision from an environmental point of view but also a bad investment. They need to understand that their members want to do something about climate change and will hold them accountable if they don’t. You’ll also have their back if they take the professional risk to move forward on addressing climate change using the funds’ monies.

I have been involved with several efforts at various pension funds to address climate risk and one of the things that we’ve discovered is that many funds can drastically reduce their exposure to the worst companies by eliminating investment in just 9-10 companies. Most investment portfolios at pension funds will be based on large market indexes that have hundreds, if not thousands, of stocks or bonds in them so this can be a very effective strategy because it won’t involve changing the overall fund or fund strategy very much.

Thus it’s an easy win – the administrators can claim legitimately to be responding to the concerns of members while also keeping their standard investment approach intact. Plus the markets will really take notice if even a few of the big guys start implementing these kinds of investment options for members.

If you’re still employed ask your human resources department for information on who to contact as they should have that information on file. If you’re independently employed and only have 401k or other retirement investments with places like Vanguard, it wouldn’t hurt to write them as well. If you are unemployed and have no retirement funds, I really hope that situation changes for you! The rest of us have the obligation to act on your behalf to collectively get these funds geared towards investing in a better future for all of us!

I’ve provided this sample letter that you are welcome to use.

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Dear Pension Fund Administrator,

I am writing as a pension fund member to find out what overall strategy the fund has for dealing with the financial risks posed by climate change. This issue will have broad and wide-ranging impacts on our economy and therefore poses a large potential risk to my pension. I want to make sure that the fund has developed a sound strategy to responding to these risks and for ensuring that my pension savings will be available for me when it comes time to retire.

To that end I would like to request the following information:

• Does the fund have an overall understanding of its exposure to climate change risks? How is this information gathered?
• For example, has the fund conducted a “carbon footprint” assessment of its investments, or an assessment of the potential for investment in so-called “Carbon Stranded Assets”?
• Who is the fund’s principle investment consultant and what strategies have they suggested for responding to the long term economic risks posed by climate change?
• What investment opportunities are available to me now that actively address the economic risks posed by climate change? What investment opportunities will be available in the future?
• How will the fund manage disinvestment from those companies with the largest carbon footprint on behalf of members?
• Overall, what recommendations can you make to the pension fund members to help us manage these risks over the long term until our retirement?

If the current level of understanding on this issue is insufficient at this time to answer these questions, please substitute your answers with details about what the fund plans to do to address this information deficit and your time-frame for providing full disclosure on these matters.

Thank you very much for your time and consideration in answering these questions.

Sincerely,

[YOUR NAME]
[YOUR ADDRESS]
[PENSION FUND ACCOUNT ID #]

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The Koch brothers may have billions to spend against us be we actually have Trillions to respond with – we just need to take the steps to get it moving in the direction that we want and help finance a sustainable future.

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