Local Government Pension Scheme (LGPS) funds have £16bn invested in the fossil fuel industry, according to a new analysis.
The research by environmental campaigners Platform and Friends of the Earth revealed that £8bn of funds’ capital is invested in companies developing new oil and gas projects.
It also found that 10% of funds hold over 50% of LGPS fossil fuel investments, with over 20% of funds committing less than 1% of their portfolio to non-renewables. According to Platform and Friends of the Earth, this is a 10-fold increase since 2020 when the last analysis was conducted.
In addition, the research found a geographical variance, with LGPS funds in England investing on average 4% of their portfolio compared to just 2% in Wales and London.
The campaigners stated that this reflects the Welsh government’s support for fossil fuel divestment in 2022 and local leadership in London sustaining action on fossil fuel divestment and investment. They added that the total £16bn of fossil fuel investments by the LGPS amounted to double the total market size of all renewable energy generation in the UK in 2022.
In a breakdown of the analysis, it revealed that the Greater Manchester Pension Fund (GMPF) and West Yorkshire Pension Fund (WYPF) both invest over £1bn in fossil fuels. It also highlighted that 27% of the £1.3bn London Borough of Barking and Dagenham Pension Fund is invested into fossil fuels.
On the other hand, the research also revealed the funds with the lowest proportion of their investments in fossil fuels, with Hammersmith and Fulham at 0%, the London Borough of Waltham Forest at 0.17%, the London Borough of Newham at 0.18% and Swansea at 0.18%.
Platform and Friends of the Earth’s research was conducted through Freedom of Information requests and analysed 75% of the assets under management of the £369bn LGPS. Both campaigners are calling on funds to stop funding fossil fuels as these investments are turning “public savings into fossil fuels playthings”.
Jaime Peters, climate coordinator at Friend of the Earth, said: “It’s time to ditch financially risky holdings in gas, coal and oil, and invest in accelerating the transformation to a carbon-free future.”
Rob Noyes, divestment campaigner and researcher at Platform, added: “To catch-up on climate, council’s must stop using pensions to prop up this deadly industry.”
Room151 has contacted GMPF, WYPF and Barking and Dagenham Pension Fund for a comment. The London Borough of Barking and Dagenham Pension Fund told Room151 that they “do not recognise this figure, but are looking into it”.
A Greater Manchester Pension Fund spokesperson said: “The Greater Manchester Pension Fund takes its responsibilities very seriously in looking after the pension promises of more than 370,000 members, and its fiduciary duty in looking after the members’ interests and the assets of the fund and to employers and taxpayers, who underwrite pension liabilities.
“The fund’s duty is to the employers and taxpayers who underwrite the pensions as the fund members have a pension promise based on salary and service and take no investment risk whatsoever – ultimately the taxpayer does.
“The fund, through its asset ownership, will continue to campaign for all companies that we have an interest in to clean up their act and become carbon neutral. The fund will not shirk from its leadership role and disinvest allowing others who do not care about the environment to own those shares instead and fail future generations to come. The fund’s active equity holdings were 20% less carbon intensive than the average pension fund and we are the biggest direct local government pensioner investor in renewable energy and energy efficiency.
“The fund is operating within a clear ethical framework and seeking to change the behaviours of those companies we invest in to become carbon neutral whilst ensuring we protect the pensions of our members and reduce cost to taxpayers.
“The fund is working hard to achieve carbon neutral status as quickly as possible but it will not jeopardise hard earned pensions of our workers and pensioners or importantly increase the costs for hardworking taxpayers of Greater Manchester. The Fund had outperformed the average local authority fund by more than £5.1bn and if we had divested we would have over the last two valuations needed a further £620m of contributions from the 10 local authority funds and other public sector employers who make up the fund”.
Room151 is awaiting WYPF’s response.
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