The Secret Angler

Some interesting points relevant to this blog’s last posting on the Environment Agency’s pension fund holdings arose in a discussion on barbel.co.uk. One contributor pointed out that green or sustainability bonds are issued by government and companies for investment in climate and environmental projects. All or most of the water utilities have issued green bonds and these have proved very popular with investors — they help with funds’ ESG (Environmental, Social and Governance) credentials. Cynically we might think this is a way to raise cheap funds to do things that look good while continuing to pay healthy dividends and big salaries to the execs. Well, that’s true, but at least it means or should mean that the water companies are doing something to meet their environmental obligations.

As far as I can make out, these green bonds are labelled as such, so it should be clear when a fund holds them. The bonds held by the EA pension fund do not appear to be ‘green’. So it doesn’t have that justification. But as I pointed out in my previous post, bonds are important to pension funds for liability matching. Similarly, shares in utilities are popular for the large and regular dividends paid (United Utilities is a ‘dividend aristocrat’ — it pays a dividend that grows each year). Pension funds should be managed independently of the parent company to avoid any financial shenanigans. In the case of the EA, this means it cannot ask the fund to expunge investments in water utilities, despite the bad look.

The blunt truth is that pension funds are expected to make a good return within their risk profiles, i.e. make money without taking big chances. If you look through the investments held in your pension you might also find some questionable companies. Private companies like water utilities have one principal goal: to maximise return to shareholders. The environment comes second unless regulators pull them up, as with Thames Water which has stumped up several big fines in recent years. The graph below shows how much regulation is needed.

The two contenders for the Conservative leadership are not saying encouraging things about the environment despite the recent extreme weather emphasising yet again what a bad state we’re in. So write to your MP, protest all you can while doing your bit. Most of us are not doing enough. We carry on consuming and driving our cars. Many still sling their litter about and that includes anglers. If we don’t stand against pollution of rivers and the wider environment you can be sure that no one else will.

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The Angling Times has published  a piece about the EA’s pension investments in the water utilities, based on some ferreting by Feargal Sharkey in his campaign to stop them polluting the rivers. I doubt, however, that ‘anglers are flabbergasted’ over this snippet of financial information. In common with most people, the minutiae of pension fund management passes them by.

It does seem galling that an organisation that is meant to protect the environment from corporate pollution should invest in significant sources of that pollution. Yet this is an issue for all pension holders. Funds must be invested to provide a reasonable pension for its members. Apart from water utilities, tobacco and oil companies are also favourites. The reason is because such companies generate plenty of cash. What they are selling is always in demand. Water companies are a particularly good source of dosh because they have a captive market and no competition. If you fancy an easy number as CEO of a big firm, they’re the employers to plump for. After privatisation by the Conservative government in 1989, they’ve been a gold mine. I once met the retired boss of Anglian Water, a salmon fisherman, who had clearly done well from it. You just have to look at the salaries trousered by the current crop to see that.

The EA pension fund invests in water company bonds rather than shares (except for United Utilities, arch polluters of the northwest), that is they loan money to them, which sounds even worse, especially when you realise that water companies have been borrowing to sustain dividend payments rather than invest in the infrastructure needed to avoid dumping large quantities of sewage into our rivers. Bonds produce a good income which is always needed by pension funds to meet payments.

The EA is not the only outfit to compromise itself. A few years back the Wild Trout Trust handed Thames Water a greenwashing opportunity by allowing it to sponsor the conservation awards. That strikes me as even worse. Then again, it’s a question of money and this never floods into angling conservation coffers.

So in a way we’re all stuck. The nature of capitalism is that the environment plays second fiddle to money, most of which finds its way into the big pockets of people like water company bosses and those with plenty of capital. I don’t think the EA should invest in the water utilities, clearly a conflict of interest. I suspect the EA pension fund trustees are unlikely to see it that way, unless they’re anglers or wild swimmers.

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