The Director of Pensions provided Members with a summary of deliberations at recent Responsible Investment Working Parties and Investment Monitoring Working Parties with a recommendation that Merseyside Pension Fund (MPF) should ensure that it does not hold investments in companies which manufactured weapons proscribed by international treaty to which the UK government is a signatory.

Government guidance set out that although schemes should make the financial return their predominant concern, they may also take purely non-financial considerations into account provided that doing so would not involve significant risk of financial detriment to the scheme and where they had good reason to think that scheme members would support their decision. Having considered a range of exclusion scenarios, it was recognised that the diversity of opinion on this subject made it very difficult for Members to have good reason to assume that members would support a specific course of action other than that established by government.  The most appropriate action, bearing in mind the various considerations discussed at the working parties and summarised in the report, was to be guided by government policy and advice.

It was noted that there had been a public campaign to have the Merseyside Pension Fund divest from companies which supported a military campaign in Gaza.

It was stated that:

·  The law was generally clear that schemes should consider any factors that were financially material to the performance of their investments, including social, environmental and corporate governance factors, and over the long term, dependent on the time horizon over which their liabilities arise. Although schemes should make the pursuit of a financial return their predominant concern, they may also take purely non-financial considerations into account provided that doing so would not involve significant risk of financial detriment to the scheme and where they had good reason to think that scheme members would support their decision

·  engaging with companies to remind them of their responsibilities under the law was important but would have a limited effect in relation to what was being manufactured.

·  Divestment would also have limited effect as the companies were publicly traded so ownership would pass to other shareholders.

·  supply chains were often long involving many companies and divesting from any one company may not lead to the desired outcome as competitors may step in.

·  Defence of the realm and the regulation of UK export licences for weapons was the role of the UK Government

·  recent guidance and legal opinion indicated that it was not appropriate for investment decisions to be made based upon political views.

·  decisions about Fund investments should be made in the best interests of the Fund’s members under the fiduciary duty.

·  42 letters had been received from members supporting divestment, against a membership of 140,000+

·  following this report, a list of companies involved would be considered at a future Responsible Investment Working Party.

·  There were other conflicts where this issue was relevant and defence companies can play a role in social stability.

Members appreciated the detail provided in the report and questioned how it related to international treaties, and also whether the 75% threshold of objection could be practically reached or even identified. It was noted that Fund members could be concerned about any detrimental effects on their retirement funds from divestment.

Councillor Pat Cleary proposed the following additional recommendation: “Given the level of concern expressed by members of Merseyside Pension Fund officers are asked to prepare a report on the steps required and the fiduciary implications of divesting from companies supplying arms to Israel.” This was seconded by Councillor Jo Bird. This was put to the vote and declared lost (two votes for, six against).

Resolved – That Pensions Committee mandates to the effect that Merseyside Pension Fund should not hold investments in companies which manufacture weapons proscribed by international treaty to which the UK government is a signatory.