A report for a Westminster Council committee says divesting the council’s pension fund from companies linked to Israel and the occupation of Palestinian territories is “not possible” with its current fund manager.
The report, which is in response to a request from the trade union Unison to review the pension fund, explains that the “pooled nature” of its funds make removing investment difficult and costly.
A report for the pension fund committee found as of 30 September, the council had a fraction of its fund — £247k — invested in the London CIV Multi Asset Credit (MAC) fund, which is managed by two companies, CQS and Pimco. MAC, the report says, had invested in bonds of the Israeli government, an Israeli chemicals company and a pharmaceutical company. The council’s total pension pot is £2.079bn.
It is understood Pimco’s managed share of the fund had invested in the Israeli government and chemicals company bonds, which it has since relinquished. Some £30k remains invested in a pharmaceutical company, with bonds due to mature in March 2027.
The assets in MAC include loans, asset backed securities, high yield debt, corporate bonds, emerging market debt cash and convertibles. The report read: “Given the pooled nature of the funds, it is not possible for Westminster to exclude particular securities. Therefore, the only course of action to remove this exposure would be to fully divest from the particular fund manager.
“However, there would be associated fees and charges in relation to any divestment, as well as opportunity costs for time out of the market.”
The report for the committee stated it had a fiduciary duty to act in the best financial interest of its beneficiaries.
It said it was not appropriate for investment decisions to be driven by political views, except where those views are prescribed in law. The committee report said this duty extends to environmental, social and governance (ESG) “considerations”, such as infringement of human rights and violations of international law.
The report read: “Thus, pension fund committees are required to focus on ensuring that sound investment decisions are made in the best interests of scheme members, taking into account all relevant considerations and excluding irrelevant ones, with committee meetings not used as a forum to set out political positions.”
It comes after members of the Unison union working for Westminster Council successfully lobbied for a review of investments back in June. The motion asked the council to divest pension contributions from companies complicit in alleged breaches of international law and human rights “particularly in the occupied territories and illegal settlements in Palestine.”
However, an opinion by Nigel Giffin KC in October refutes claims that such investments could lead to criminal liability under the International Criminal Court Act (ICCA) 2001 or the Terrorism Act 2000. He goes on to say there is “insufficient public evidence” to conclusively determine Israel is committing ICCA offences. He also said these investments did not constitute an “arrangement” under the Terrorism Act 2000.
Councillors briefly discussed the findings during a meeting on Thursday 12 December. The committee noted the report and agreed to the recommendation to “not take any divestment action”.
“The Fund will continue to encourage positive change on all ESG factors, while officers will continue to engage with the investment managers to monitor investment performance, including consideration of human rights, international law and other ESG issues,” stated the recommendation.
It comes after Kensington and Chelsea Council’s pension fund was in the spotlight in November over links to Israeli arms. A review found BlackRock Aquila Life, which holds £14mn of the council’s pension fund, had invested a fraction of it in Elbit System and General Dynamic Corp which supply arms.
CQS and Pimco declined to comment.
Westminster City Council: Pension Fund Committee, Thursday 12 December 2024.
Additional reporting by Linus Rees.
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