USS to vote against directors with unsatisfactory climate transition plans

The Universities Superannuation Scheme (USS) has announced a new policy which will enable it to vote against individual directors of companies, to hold them accountable in certain instances – including ‘where a company is lagging in its climate ambitions or disclosures’.

The policy would first be enacted in May. For some, this may be too little too late. Although the decision has been welcomed by Ethics for USS, a self-proclaimed ‘group of USS members committed to reforming USS and ensuring an investment strategy that protects the planet, respects human rights, invests responsibly and ensures good pensions’, they told the Financial Times, “USS also needs to stop funding all new fossil fuel developments and to divest immediately from fossil fuel companies that are not rapidly cutting emissions.” The group runs the Divest USS campaign, which believes that “USS’s action to address the climate emergency has been woefully inadequate” and aims to rectify that by pushing for reform.

Subsidiary group Save Pensions and Planet will attend the Court of Appeal on 13 June with the hopes to hold USS directors legally accountable for failing to fulfil their duties. The appeal, for which already over £381,000 has been crowdfunded to cover legal fees, mostly focuses on the pension cuts of April 2022. However, it also hopes to hold USS to account to “divest fossil fuels with a plan that includes a credible shareholder voting policy for clean energy in all companies”. 

Organisers argue that this is actually intrinsic to protecting their pensions, as it makes no economic sense to continue investing in fossil fuels. On the Crowdfunder page, they explain “Gas, oil and coal were the worst performing assets in modern history; the 2022/23 energy crisis and price spikes simply underlines their volatility, and they have no future.” As of October 2022, the £91 billion pension fund had holdings in 48 leading fossil fuel companies. 

Hence the appeal cites a “failure to act in beneficiaries' best interests by not divesting from fossil fuels, even though these are causing significant financial detriment: coal, oil and gas are the worst performing asset class, they are destroying the ecosphere, and the beneficiaries of USS have said they want to divest.” 

Indeed, when the appeal was launched in March last year, Save Pensions and Planet highlighted “the failure of USS to [divest from fossil fuels] cost us £500,000,000 in write-offs from Russia's appalling invasion, and all because the failed USS chair and directors had careers in coal and fossil fueled banks.” Currently, USS invests over £570 million into fossil fuel companies. 

Organisers write: “If we get out of fossil fuels, our pension will not face massive climate risks from bankrupt fossil fuels; it will be healthier, and so will our planet.” 

It’s an ambitious case – the “first case in the world to hold directors of a corporation directly accountable for climate risk,” according to organisers – and was dismissed by the High Court because “duties cannot be enforced unless directors personally benefit from their breach”. Nevertheless, the organisers persist:, writing “We will not accept the climate risk to people's pensions, or the damage to our environment.” 

A Crowdfunder donor commented “Such a shame that the USS is unable to adapt appropriately to the major issues of our time, without being pushed into doing so.”