Local government councils still holding £10bn investment in fossil fuels

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UK local government pension funds held £9.9bn worth of investments in fossil fuel companies in the 2019/20 year despite promoting moves towards greener investing, a freedom of information (FoI) request shows.

UK local government pension funds held £9.9bn worth of investments in fossil fuel companies in the 2019/20 year despite promoting moves towards greener investing, a freedom of information (FoI) request shows.

While over 75% of local councils have declared a “climate emergency” the FoI found a significant tilt toward fossil fuels remains prevalent in many councils’ pension funds.

Findings in the Divesting to protect our pensions and the planet report – released today (23 February) – by Platform, Friends of the Earth (England, Wales, and Northern Ireland), and Friends of Earth Scotland show Greater Manchester, Strathclyde, and West Midlands continue to hold the highest investments in fossil fuels. Together, they account for 20% of all local government pension schemes’ fossil fuel investments in the UK.

The three local authority pension funds with the largest percentage of their assets invested in fossil fuel are Teesside, Dyfed, and Dorset. The report shows the three invest what equates to around 5% of their pension fund’s total value.

Fossil fuels also represent 3% of the total value of the Local Government Pension Scheme, the report found, with coal accounting for £3.4bn (34%) of fossil fuel investments and oil and gas accounting for £6.5bn (66%). 

Just under three quarters (72%) or £7.1bn of fossil fuel investment takes place indirectly through investment funds, which invest local government pensions in fossil fuel companies. 

“Councils can’t make a bold claim about saving the planet while continuing to invest in fossil fuels,” said Friends of the Earth divestment campaigner Rianna Gargiulo.

Local authorities have the power and duty to ensure local workers not only have a pension for their retirement, but also a future worth retiring into.   

“Instead of stubbornly sticking with old systems of investment that worsen climate breakdown, councils should invest in renewable energy and social housing. These are the areas that benefit communities and households and are a better investment in every sense.”  

The report publishers have now created a public dashboard to allow people to explore their local authority pension fund’s investments in more detail, and shows direct or indirect shares the fund invests in.

The dashboard will also allow people to compare how a local authority pension fund’s fossil fuel investments compare with other funds.  

Platform campaigner and researcher Robert Noyes said local councils should be looking to plug a “decade of austerity” by investing in local priorities.

“Instead of making risky bets on fossil fuels, let’s channel the wealth in our pensions to local communities and build a better world beyond the pandemic,” he said. “Whatever your stake in your pension – imagine what world you want to retire into – and push your pension to invest in it.” 

The findings follow analysis from Transition Economics in December – also commissioned by Platform – which found more than £1.75bn had been wiped from the pension funds of councils across the UK after three years of crashing oil investments. The largest losses occurred at the pension funds of Great Manchester, West Yorkshire, and Nottinghamshire.

West Midlands’ response

However, the West Midlands Pension Fund this morning sought corrective publication of the data in the report which it has said are “inaccurate, resulting in a gap and error which overstate the West Midlands’ exposure”.

Director of pensions Rachel Brothwood said: “West Midlands Pension Fund continues to raise the agenda for climate awareness, risk assessment and increased disclosure through engagement, targeting an increased pace of action on climate change.

“The data and tools to measure and monitor climate risk exposure need much further development to inform decision making by long-term asset owners.  The fund has taken the decision to publish its work to date to demonstrate how increased company disclosure is starting to inform investment decisions.”