The Debate: Should Mersey pensions be invested in arms?

Dec 4 2007 by Liam Murphy, Liverpool Daily Post

Should pension funds only focus on money? Liam Murphy reports

LAST week, Wirral council’s pensions committee refused to change its policy on “ethical investment”. The authority administers the pension fund on behalf of the five Merseyside councils and thousands of local government workers and university staff in the area.

Three of those councils – Liverpool, St Helens and Knowsley – had voted for resolutions to halt investments in companies involved in the arms trade.

Liverpool council’s resolution stated that “investment in the arms trade is not compatible with good corporate, social and ethical governance”, with similarly worded resolutions by St Helens and Knowsley authorities.

The decision of Wirral council to continue with pension investments which might involve arms companies was criticised by the Stop the War Coalition who have been pressing for a re-think on how the money is used – and how the fund can be used to promote more ethical trading.

Earlier this year, the Daily Post had revealed that the fund had £13.6m linked to investments with firms that are involved in aspects of armaments trade, including BAE, Boeing and Rolls-Royce.

The pension fund manages an investment pot worth around £4bn, investing on behalf of workers in local government, housing trusts and staff at John Moores University and other local colleges.

Wirral councillor and chair of the pensions committee Ann McLachlan defended the decision saying their “over-riding priority” and legal duty is to maximise returns for past, present and future contributors to the fund.

She also said that, as a signatory to the UN Principles for Responsible Investment, the fund already seeks to incorporate environmental, social and governance criteria in its investment processes, and by investing in companies can “engage with them” about their business.

So, today, the Daily Post asks: Should Mersey pensions be invested in arms?

liammurphy

YES: We can’t put troops in danger without protection

AS A former soldier who was injured during my tour of duty in Northern Ireland, and saw my best friend killed in the same incident, I know full well how important it is for our troops to have the best possible equipment.

We can’t rely entirely on buying weapons from abroad and this is my starting point for this debate. Without investment in companies – which incidentally employ tens of thousands of British workers – we could find ourselves sending our young troops overseas into dangerous situations without the necessary weapons and protective equipment.

I served in the Second Battalion of Royal Green Jackets, did five tours in Northern Ireland during the Troubles, and am now disabled as a result. I am now as opposed to wars as anyone – but I live in the real world. This is not a Utopia where use of force by our Government is unnecessary. My son is also in the Army and has served in Iraq, and next year will be going to Afghanistan, facing the significant danger many of our troops have been facing in the name of creating a better and safer world for the rest of us. We have to realise there are people out there who present a significant danger to us and our way of life, and force is sometimes the only way we can protect ourselves.

It is hypocritical of people to say they oppose investment in the arms trade, but at the same time saying they want our troops to be armed with the best equipment possible to keep them safe.

It is also important to remem- ber that these companies employ many workers in this country.

There seems to be little understanding of the complexity of this issue. Many companies being targeted by those opposed to “the arms trade” are rarely involved solely making weapons. Diversification means many companies are involved in a variety of related industries – with the result that you could threaten the prosperity of those which are only loosely connected to arms.

How do you decide to draw the line? Would you choose only companies that have absolutely no involvement? What if a company only makes defensive items, such as body armour? Should they be ruled out, too?

Finally, those paying into pensions expect their savings to be administered to maximise their profit when they come to retire. We often hear of those affected by badly-invested pension funds, and it is the responsibility of those in charge to ensure they get the best returns possible.

That is not to say they should invest anywhere – the law is quite clear about what is legal and what is not – but to impose a particular ethical view on those investments could deny others the best return on their pension.

NO: It’s not about defending jobs, but about ethics

STOP the War Coalition has campaigned for 18 months for Merseyside Pension Fund to shed its investments in the arms industry.

We convinced three Merseyside boroughs – Liverpool City Council, St Helens and Knowsley – to pass resolutions calling on the Pension Fund to do so. This is an historic decision that no other council in the country has adopted.

As the Pension Fund represents the pensions of employees of five Merseyside boroughs, we felt confident that, by having the support of the majority, the fund would alter its Statement of Investor Principles (SIP) to an ethical one. The fund’s meeting on November 26 ignored the will of the three councils and voted to ratify their revised SIP, continuing arms investments. No meaningful explanation was offered. The few press statements have said that it is “illegal to disinvest” and that Stop War was asking for the fund to disinvest from the FTSE100.

The fund is basing the illegalityŠargument on the Cowan v Scargill case of the 1980s, which set a precedent that the sole responsibilities of trustees is to maximise financial returns.

In 2005, the United Nations commissioned one of the world’s top legal firms to write a document on ethical investments. It states: “In our view, Cowan v Scargill cannot be relied upon to support the single-minded pursuit of profit maximisation.”

To say Stop War wants to prevent the fund from investing in the FTSE100 is ridiculous. The councils’ resolutions simply call for “divestment of shares in companies with significant involvement in the arms industry”. The Co-op Bank screens out arms companies but invests in the FTSE100.

The case for arms trade disinvestment is strong. Look at the record of BAE Systems. Liverpool City Council says guns kill communities and yet here is a company that sells arms to almost every dictator in the world, like General Pinochet (30,000 Chileans dead) and General Suharto (650,000 East Timorese dead). It is ridiculous to lay these deaths at the door of BAE but, according to journalist John Pilger, UK arms sales since 1980 have cost the lives of nearly 1m people.

The fund talks about defending jobs in the arms industry. However, pound for pound, investment in civilian industries creates many more jobs. Finally, the fund talks about constructive engagement with arms companies. How likely are arms companies to be ethical? Who gets listened to: A pension fund with £2m invested or an arms contract worth £10bn?Š

ŠGiven the importance of this issue, we ask Merseyside Pension Fund to fully disclose all legal advice they received to support their decision and respectfully ask that they seek a second legal opinion.