£16bn of fossil fuel pension investments ‘undermine council climate action’

Council pension funds in the UK have £16bn invested in the fossil fuel industry, according to research by environmental campaigners.

However, the analysis by Platform and Friends of the Earth also found a fifth of Local Government Pension Scheme funds have less than 1% of their assets invested in fossil fuels.

The researchers collected data for 2021-22 using freedom of information requests, annual reports and committee meeting minutes, gathering information representing 75% of the total value of the LGPS in the UK.

They identified £12.2bn of fossil fuel investments, and extrapolated the £16bn figure by assuming the same proportion of fossil fuel investments was included in the 25% of LGPS assets they did not have data about.

Jamie Peters, climate coordinator at Friends of the Earth, said: “From insulating heat-leaking homes to facilitating mass public transport, councils are key to effective climate action, but this is undermined if local authority pension funds continue to fund fossil fuels.

“It’s time to ditch financially risky holdings in gas, coal and oil, and invest in accelerating the transformation to a carbon-free future.”

The research suggests the LGPS in England has the highest proportion of fossil fuel investments, at 4% of assets the researchers collated information about, with Scotland at 3.3% and Wales at 1.7%. Northern Ireland was lowest, at 0.6%.

According to data provided by the researchers, Greater Manchester Pension Fund has the biggest proportion invested in fossil fuels, at 7.5%.

When approached for comment by LGC, the fund provided a 300 word statement but refused to let LGC use it unless it was published in its entirety.

It also noted it had achieved £620m investment returns in the last six years by not divesting, allowing it to reduce contribution rates for councils in Greater Manchester, said its active equity holdings were 20% less carbon intensive than the average pension fund, and it was the biggest direct local government pension investor in renewable energy and energy efficiency.

Jo Donnelly, board secretary to the LGPS advisory board in England and Wales, said investment decisions are a matter for individual funds, which consider the risk to investment portfolios caused by climate-related factors as part of being responsible investors and asset owners.

She added: “Many LGPS funds have set net zero targets or goals and this is something that funds should review at regular intervals, allowing them to prepare for and navigate the transition in as smooth a fashion as possible – limiting the potential for stranded assets.

“Naturally funds will have different approaches to holding fossil fuel-related investments, and they may wish to consider looking to their pools to assist them to assess and achieve their net zero targets, where the pool can offer that support.”