Bill Galvin is group chief executive of the Universities Superannuation Scheme
The judiciary’s decision to grant the appeal against the building of a third runway at Heathrow, announced earlier this week, was disappointing to say the least.
But we, as the largest private pension scheme in the UK and a major investor in the airport, do not believe that a vibrant, open UK economy enjoying all the benefits of a larger Heathrow, should sit at odds with looking after the climate.
After all, as a scheme with more than 400,000 members, taking long-term risks into account and balancing them against our investment decisions is what we do for a living.
In 2013, USS, which now has around £75billion in assets under management, took a 10 per cent stake in Heathrow on the basis that we were prepared to commit to a globally successful airport with one eye on expansion.
Anyone who has followed Heathrow will be aware that the airport has been operating at near capacity for many years, curbing the country’s ability to compete on the world stage.
It is quite correct that the judicial process should listen to legitimate concerns and that environmental risk is a critical issue.
But the decision earlier this week was not a ruling on whether the third runway should go ahead, but on the content of the original Airports National Policy Statement, which was approved by a majority in Parliament in June 2018. This set out the terms needed to enable the development of the third runway.
The judiciary agreed that this policy statement did not take account of the obligations under the Paris Agreement, but it could be amended. This does not and should not mean that the idea is shelved for good.
We as a society cannot ignore the urgent need to look after our environment. Indeed, we did not enter into our investment without due consideration for the environment.
In 2013, Universities Superannuation Scheme took a 10 per cent stake in Heathrow
As responsible owners, USS was an early adopter of global initiatives by pension funds to do our part on this issue. We supported the Paris Agreement to keep global temperature rises to 2°C or less, and we were a founder member of the Transition Pathway Initiative, which was set up to monitor progress on delivering this.
We have been strong supporters of Heathrow’s own moves to reduce carbon emissions. Only last week it announced that it had become one of the world’s first major aviation hubs to become carbon neutral for infrastructure, following £100million investment in energy efficiency schemes.
The UK aviation industry has also produced a comprehensive plan which sets out how they intend to meet Carbon Net Zero by 2050. We believe we can deliver both expansion, and the economic growth it brings, and meet our obligations towards reducing carbon emissions. It need not be an either/or situation.
But let us not forget why this debate all started. More than a decade ago the Government first started talking openly about a third runway with the idea to make the UK more connected globally. The expansion would bring jobs and help grow the economy around the country. Those arguments are more prescient than ever.
Heathrow, with our support, has already promised to boost the UK economy by over £200billion, as well as create around 180,000 jobs. That is aside from the benefit to consumers from having greater travel choice between airlines. We as investors have been busy getting on with preparing for expansion and shareholders have committed over £500million of funding to ensure we are ready.
The current Government has placed infrastructure development as a key policy initiative
Again, as a long-term investor, we are not looking to make a quick return and sell up at the first hurdle, but we are investing for decades into the future. We have to. Our reason for being is to pay the pensions of over 400,000 members as they fall due. What better investor for a company like Heathrow than a pension scheme which has a similarly very long-term outlook?
Yet, even though we should be the most ideal owners for complex infrastructure in the UK given we already invest around 40 per cent of our assets here, this latest decision will only strengthen the negative message that is being sent to global investors who want to put money to work in the UK.
And this is all happening at exactly the same time as the current Government has placed infrastructure development as a key policy initiative; in the 2019 Queen’s Speech the Government confirmed plans to invest £100billion to transform the UK’s infrastructure and its ambitions extend to all areas of economic infrastructure including transport.
A project that seemed hugely positive for the UK economy, creating jobs and trade links that the UK desperately needs, need not hang in the balance. With our members based here in the UK USS wants to invest more in our home market and Heathrow’s expansion would be a great way to start.
Caring about our environment and economic progress can go hand in hand.
Bill Galvin is the group chief executive of the Universities Superannuation Scheme, which controls £75billion and serves 400,000 members.
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