An amendment to the upcoming pensions bill tabled by Conservative MP Robert Jenrick, which is aimed at limiting the Local Government Pension Scheme funds’ association with Israeli boycotts, is not expected to be backed by parliament.
The public service pensions and judicial offices bill, which received its first parliamentary reading in July 2021, has been subject to a number of amendments from MPs.
These include Jenrick’s proposal that administrators of public sector pension schemes “may not make investment decisions that conflict with the UK’s foreign and defence policy”.
The amendment is motivated by a desire to disassociate LGPS funds from the Boycott, Divest and Sanctions campaign, a movement against Israel’s occupation of contested territories in the Middle East.
Pensions that are paid for by the taxpayer and underwritten by the state should not undermine our foreign and defence policy
Robert Jenrick, Conservative MP
The UK government says that it is working to improve the nation’s security and prosperity “through a just peace between a stable, democratic Palestinian State and Israel, based on 1967 borders, ending the occupation by agreement”.
BDS bill means amendment is likely to fail
LGPS funds have been under pressure over links to investments in disputed Israeli territories for several years.
As Pensions Expert reported in May 2020, the option to divest from Israeli settlements on ethical grounds was opened when the Supreme Court ruled in favour of the Palestine Solidarity Campaign in its case against the government.
At the time, the government said it was committed to stopping “local boycotts” and would be introducing legislation to re-establish the ban.
A couple months later, a searchable database compiled by the Palestine Solidarity Campaign contained records of 33 LGPS funds retaining investments worth more than £2bn in arms manufacturers and in companies accused of supporting illegal Israeli settlements.
At the end of 2021, Canadian Professor Michael Lynk, who works with the Office of the High Commissioner for Human Rights, wrote to all LGPS pension committee chairs, requesting that they divest from any holding that may be linked to contested Israeli settlements.
In a column in The Times written on February 21, Jenrick hit out at efforts to encourage LGPS funds into boycotting Israel, noting the pressure placed on the Merseyside Pension Fund last year to divest from travel company Expedia, which has been criticised for listing properties in Israeli settlements.
As of June 2021, the Merseyside Pension Fund held investments in seven companies listed by the UN as operating in occupied territories, including Expedia, Booking Holidays and Motorola.
“Pensions that are paid for by the taxpayer and underwritten by the state should not undermine our foreign and defence policy,” Jenrick wrote in The Times.
“If accepted, this measure will presage a wider bill outlawing BDS throughout the public sector, which I hope the government will bring forward in the next parliamentary session.”
On its website, the LGPS Scheme Advisory Board said that the amendment was unlikely to pass, given that a separate, expected BDS bill is likely to include similar provisions to those submitted by Jenrick.
The SAB therefore believes that this amendment is unlikely to have the backing of the government.
Sending a message
Jenrick is not a government minister, and amendments like these are often viewed as ‘rebel’ amendments, which the government would whip its MPs to vote against.
Former pensions minister Sir Steve Webb, now partner at LCP, observed that amendments like these are often a way of MPs signalling to the government that they are interested in an issue, but these generally have little chance of being successful.
“There are many areas of pension scheme investment where different arms of government would be interested in trying to nudge schemes to promote the government’s wider agenda, but this is a dangerous road to go down,” he said.
“In private sector schemes, trustees are already empowered to take account of ESG factors where these are materially relevant, but it would be a big step to override their fundamental fiduciary to their members, first and foremost.”
LGPS seeks UN clarity on Israel investment comments
The Local Government Pension Committee and the Local Authority Pension Fund Forum are to arrange a call with UN special rapporteur Michael Lynk, seeking clarity over his comments on investments in contested Israeli settlements.
The debate brings up once more the tension between schemes’ desire to invest their funds ethically, a demand often put upon them by their members, and their responsibilities to invest their assets in order to maximise returns.
Joe Dabrowski, deputy director of policy at the Pensions and Lifetime Savings Association, said that it was important to remember that the primary duty of LGPS funds lies with looking after their savers first.
“People’s retirement savings should only be invested with that end in mind, and not for policy considerations at either local or national level,” he noted.
