UK
Divesting from businesses involved in Palestine would ‘breach legal guidance’, council says
Protesters call for divestment last week. Photograph: Noora Mykkanen
Hackney Council says its hands are tied over its pension fund’s investment in “business activities in the Occupied Palestinian Territories”.
A string of protests have interrupted Town Hall meetings in recent months as campaigners urge the council to take a stand in the Israel-Palestine conflict.
They want the pension fund to divest from firms such as Israeli defence company Elbit and construction giant Caterpillar.
Organisers of the protests, the Palestine Solidarity Campaign, allege the fund has £30m invested in such companies – compared to the council’s figure of £2.02m.
The fund has passive investments worth £1.9m in “companies conducting business activities in the Occupied Palestinian Territories”, pensions committee chair Cllr Kam Adams said previously.
It also has a holding in Elbit Systems, which was worth £25,700 in June.
However, the fund does not “directly own any stocks or shares in individual companies”, Cllr Adams told the Citizen following a protest on 7 February.
“All of the fund’s equity investments are held indirectly; the Hackney Pension Fund owns units in externally managed pooled investment funds which in turn own the underlying investments,” he reiterated.
The only way to divest from the stocks listed would be to dispose of the investment fund and find an “alternative solution which would guarantee exclusion of those companies”, he said.
“This would expose the Hackney Pension Fund to significant costs resulting from both the transition of assets and the requirement to use a highly customised investment strategy.”
“The committee believes that commitment to the form of divestment requested by the Palestinian Solidarity Campaign would risk financial detriment to the fund and would breach Law Commission guidance,” Cllr Adams said.
He added that while environmental, social and governance factors, including human rights issues, are “important considerations” in investment decisions, the pensions committee is legally required to “ensure the fund generates returns to keep paying the pensions that thousands of former council employees rely on in their retirement”.
Divesting from Russia
The council’s pension fund was able to pull out from Russia because the legal and foreign policy landscape changed after the war in Ukraine.
The international sanctions against Russia meant “clear long-term financial concerns associated with the assets”, Cllr Adams said.
After the UK government imposed sanctions on Russia, the divestment decision became lawful.
Unlike the passive investments, assets in Russia were held in an “active equity portfolio”, meaning the manager of the fund could divest from individual stocks without the need for the Hackney Pension Fund to dispose of its entire portfolio, Cllr Adams explained.
The requested divestment is held through funds that track an index, whereby the manager has “no ability to remove individual stocks from the portfolio”.
Adams added: “Divesting from the assets requested would require the fund to completely dispose of two large investment funds with a total value of over £350m. This would expose the fund to significant costs as set out above.”
The pension committee expressed its “sorrow at the ongoing conflict and for the many lives lost as a result of the hostilities”.
Adams said: “The violence has had a devastating impact on so many innocent people, and it is vital that the international community makes all possible efforts to push for a swift and peaceful resolution of this terrible conflict.”
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