Research

£9.9 billion still invested in fossil fuels by local government pension funds

Billions of pounds remain invested in fossil fuels through local government pension funds, even though three-quarters of councils have declared a climate emergency, a new report reveals. 

Preston New Road, 16 September 2019. Photo: Ros Wills

The study, by Friends of the Earth and the Platform environmental collective, found that local government pension funds held investments of £9.9 billion in fossil fuels. Oil and gas investments accounted for £6.5 billion and coal for £3.4 billion.

The report, described as the most up-to-date review of local government fossil fuel investments, is based on responses to freedom of information requests to every local authority that administered a pension fund for the 2019-2020 financial year.

The authors said the findings were likely to be an underestimate because they looked only at investments in the world’s top 200 fossil fuel extraction companies. If all fossil fuel producers and service companies had been considered, the total figure would be more than £10 billion, the report said.

About 75% of UK local authorities have declared a climate emergency. Despite this, the study revealed that 90 pension funds have fossil fuel investments: 78 in England, 11 in Scotland, 8 in Wales and one in Northern Ireland. 6.8 million people depended on local government pension funds across the four nations.

Fossil fuel investments accounted for 3% of the total value of local authority pension fund investments (2% of oil and gas and 1% for coal).

Nearly three-quarters of fossil fuel investment (£7.1 billion) was made indirectly through investment funds.

Rianna Gargiulo, divestment campaigner at Friends of the Earth, said:

“Declaring a climate emergency may garner good headlines but too often it seems to stop there. Councils can’t make a bold claim about saving the planet while continuing to invest in fossil fuels. 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.”

Top 10s

10 companies accounted for 70% of local authority pension fund direct investments, the report found.

Of these, BP, Shell and BHP accounted for 40% of total direct investments across all local authority pension funds in the UK. The top 10 also included Mitsubishi, Mitsui, Anglo American, Glencore, ENI, COP Holdings and EOG Resources.

The top 10 funds with the biggest investments in fossil fuels were:

  1. Greater Manchester (£1,012m in fossil fuels out of total fund value of £22,035m)
  2. Strathclyde (£508m out £22,702m)
  3. West Midlands (£508m out of £14,768m)
  4. West Yorkshire (£503m out of £13,214m)
  5. Nottinghamshire (£2421m out of £5,770m)
  6. Merseyside (£240m out of £8633m)
  7. Tyne and Wear (£238m out of ££8,453m)
  8. South Yorkshire (£230m out of £8454m)
  9. Kent (£210m out of £4,110m)
  10. Teesside (£201m out of £4,110m)

The top three (Greater Manchester, Strathclyde and West Midlands) accounted for 20% of all the local government pension fund fossil fuel investments.

The proportion of the value of a fund from fossil fuel investments ranged from a high of 4.91% for Teesside Council to a low of 0.87% for the Environment Agency.

The local authority pension funds with the highest proportion of investments in fossil fuels were:

  1. Teesside (£201m out of £4,110m)
  2. Dyfed (£114m out of £2,378m)
  3. Dorset (£128m out of £2,705m)
  4. Warwickshire (£94m out of £2,025m)
  5. Royal Borough of Greenwich (£53m out of £1,160m)
  6. Greater Manchester (£1,012m in fossil fuels out of total fund value of £22,035m)
  7. Gloucestershire (£100m out of £2,245m)
  8. London Borough of Wandsworth (£103m out of £2,385m)
  9. Shetland Isles (£20m out of £459m)
  10. Somerset (£97m out of £2,270m)

“Fossil fuel investment risks”

The report concluded that investing in fossil fuels was increasingly costly and a financial risk. It cited a Financial Times article which reported that UK public pension funds had lost £2b on oil investments in the past four years.

It also said it was a political risk, with government data showing that the UK public was increasingly concerned about climate change.

The report urged local councils to support local investment priorities in 2021. Robert Noyes, campaigner and researcher at Platform and a report author, said:

“After a decade of austerity and the devastating economic impact of Covid across the UK, local councils can and should be using their pension funds to support local investment 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. Whatever your stake in your pension – imagine what world you want to retire into – and push your pension to invest in it.”

Platform and Friends of the Earth had carried out comparable studies in 2015 and 2017. In 2019-2020, they found that the value of fossil fuel investments had fallen about 40% since 2017.

In 2019-2020, a bigger proportion of fossil fuel investment was through indirect investments through equity funds, compared with 2017.

44 replies »

  1. Perhaps those that run pension funds-NOT THE COUNCILS-recognise they have a responsibility to maintain value within the pension funds? Maybe fossil fuel will become a less attractive investment in the future but with oil now back at over $65/barrel and forecast to be $75 by September doesn’t seem to be a pattern yet. Take Covid-19 out of the equation and check to see which companies are within the top sector for dividend payments, and oil and tobacco are still there. A few may not like that, but many obviously do, otherwise they wouldn’t still be there.

    Employers are not the decision makers regarding pension funds-thank goodness, remember Maxwell-and it would be unwise for locals to support Councils who interfere in this respect, otherwise they might just see a sudden precept added to their local taxation. Would FOE step in and help out? LOL.

    Of course, there is now much more freedom for employees to determine what type of pension they desire, but I suspect the majority will continue to opt for the type that gives maximum return combined with maximum security. Hopefully, they have a long time to then consider whether their freedom was exercised well, rather than die early unable to heat and eat. And, yes, that does happen in the UK.
    .

    • Judging by the comments by the fossil fuel industry protagonists here Iaith1720, the pension fund support for the fossil fuel industry is their Achilles Heel. Hence the desperate efforts by the usual suspects here on Drill or Drop, to spin and big up the expected resurgence of the price of oil.

      It begins to look like a replay of the tobacco industry crisis in the 20th century. The tobacco industry could only maintain their outragious profits and lies that tobacco has no cause for cancer, and plainly and clearly lied about the dangers of their product until it became public knowledge. Once the truth became known, they concentrated their efforts on the third world and continued their poisonous profit priority industry in spite of the risks to health there.

      Unfortunately for the tobacco industry, the internet has enabled even the remotest population to discover the truth for themselves. How the present gross internet censorship worldwide, will deal with the claims of “no effect on health” of the fossil fuel industry, in spite of the evidence to the contrary, remains to be seen.

      Once hedge fund and pension managers get the whiff of the public pressure regarding the dangers as illustrated by the 1 in 5 deaths being due to fossil fuel pollution.

      The recent court decision have already called for total transparency as to where the tax payer funds have been embezzled and salted away into concealed private concerns during this pandemic. That can only extend into further investigation and may well expose similar activities in the pension funds in the light of the governments claimed zero carbon policies. (i’m sure some “experts” will emerge to reveal the “truth” on that?)

      The plain fact of the planet being in the beginning of the sixth major extinction of life on planet Earth and the clear evidence of climate change acceleration causing increasing fluctuations of extremes in temperature, for which you only need to refer to Texas USA in the past months. A substantial cause of which being due to the present reliance on only one source of energy, and the insane greed and profit motivated exploitation of the last diminishing depleted non renewable resources. Then better investment projections in renewables and the public pressure to divest out of less ethical funds into more sustainable resources, then the fossil fuel pension market will collapse, and may already be doing so.

      Are we looking at the fossil fuel bubble on the verge of bursting in this effort to big up the Achilles Heel of pension funds?

      Enough words for you Paul? I could “squeeze” in a few more provided enough “proppant” is injected?

      Have a nice day.

      Ha! Ha!

      [Correction at poster’s request]

      • BAT share price 01 2000 380p. Today 2566p without re investment of dividend. Looks like the 1 in 5 deaths report ( which is not reporting much new knowledge ) may not upset the financial market any more than knowing that excess consumption of alcohol causes problems. Plus, impeoving planning laws in the UK will not affect that number, but doing something about traffic may well so so..to whit as HCMC is trying to do with their delayed mass transit system ( which does not come under UK planning laws, but is still delayed). Maybe the London congestion charge has and or will so more than fiddling planning law to appease the polluters.

    • There you go Iaith1720 – Paul Tresto has indeed got more to say just as I did, although he says he has no idea what he is talking about? But apparently that’s not unusual according to his own words….I wouldnt go that far, or be so cruel. But if we are to take what he says as gospel, then, who are we to disagree?

      [Edited by moderator]

      However. Back to the subject:-

      Perhaps he is implying that the pension funds getting trapped in the inevitable planet wide bang of the bursting of the fossil fuel bubble as funds are divested from fossil fuels in favour of more reliable and stable investments will be a major financial extinction event of biblical, or perhaps, more accurately post biblical proportions.

      Not to mention the illusion that stopping Horse Hill exploration and production will not have any impact on saving the planet and that Norway’s increasing production and new exploration is not going to have an impact on deaths and climate change? When clearly it will.

      Fascinating isnt it.

      What do you think Iaith1720?

  2. So much for ethical advice! Look after yourself: the rest be damned, billions of them. Is this the message Drill or Drop wants to send out? Fortunately I know otherwise.
    Urge your local authority fund managers to enact that to which they have put their names (and ours).
    To do otherwise really is hypocritical. Make the change you want to see. Don’t shrug your shoulders and hope it all goes away. This would be an abdication of responsibility.

  3. Perhaps get someone to read my post to you, 1720?

    They will explain the bit about freedom of choice to you. (It means that most employers offer the employee choice as to which pension they wish to have their money invested in, or perhaps choice to opt out and make their own arrangements.) Perhaps that freedom will be directed towards “ethical” choices but your ethics will be different to others. For example, some may be quite keen to invest in HS2 if they have travelled on the TGV, and believe that is the “ethical” thing to do, reducing emissions-compared to motorways. Your idea of ethics in that respect may not get a lot of people’s attention, because when most are looking at their pension options they really do examine the maths.

    [Edited by moderator]

  4. Personally i find this type of message incredibly ironic for many reasons! The Virtue Signalling messages reported by DoD and discussed by FoE’s Rianna Gargiulo, someone who is probably under the age of 35 and potentially many years away from taking our her Pension. The reality is every one who is currently enjoying a STATE PENSION, has in some form or another been allowed, directly on indirectly knowledge on where their pension has been derived and grown. This would have allowed them the satisfaction on enjoying their afterlife!! Pensions are part of a portfolio of many diverse growth funds, and you would be a HYPOCRITE to bash the hand which currently feeds you, Renewables are subsidised hugely to the UK taxpayer, while paying NO return on investment or Dividends!! Where is it Ms Rianna future pension and Ms Finch’s curent pension lie? Could those who OPPOSE HYDROCARBON EXTRACTION, PASSENGER FLYING, VEHICLE DRIVING, USE OF TRANSPORTATION OF GOODS AND FREIGHT, TO ENJOYING VIEWING OF THE MARS LANDING please obstain from the above, or Hypocrisy is the name of the game…

  5. Thanks for the suggestion, Martin, but I couldn’t inflict that on anyone.
    It would surprise me if you were correct and that the individual can usually decide whether her or his employer invest ethically or not. She or he could of course try and persuade, or opt out and invest ethically, but that’s a big ask for most people and rather daunting.
    I suspect that many of us would regard it as ethical for one to act as one is claiming to act. To clarify, if a local authority is committing itself to fossil free pensions investment, then it might seem unethical for it to continue to invest in fossil fuels. I hope this is clear for you. It has to do with ‘truth’: not your truth or my truth, just truth.
    You may of course be right in believing that given the choice between an ethical investment with poor returns and an unethical investment with higher returns, the individual might opt for the latter. However some might appreciate a call to do the right thing regardless of the arithmetic: I believe that this is increasingly the case as we are better informed of the real consequences of the unethical choice. In any case, the choice is not now so stark. Coal, oil and gas are looking increasingly like stranded assets, and renewables seem to be competitive in the long term, and, what is more, of infinitely greater benefit to humanity and to the planet we share..

    • You really do not understand pensions, do you, 1720!

      If an employers pension scheme does not suit an individual they can very easily opt out into a scheme they prefer-also managed by professionals. Why would that be more daunting? Those who want to opt out should have some knowledge, otherwise why would they want to opt out?

      Councils should not be deciding anything for their employees in this respect, it should be down to the Trustees, including the employees representatives. And remember that pensions are fluid in respect of where money is invested, otherwise they will lose opportunities. None of my managed pensions stay static. And, also remember that there are many pensioners receiving pensions from Councils-many more than those paying in and awaiting one. Try offering new members a pension with lower returns than those members already receiving. Good luck with that.

      Perhaps you would like the “ethics” to have caused an investment into Tesla? Lost 20% value since January, and where is the dividend? Come on then FOE, cover the loss. No chance.

      A pension is to provide the recipient, who has worked hard for it, with security in their retirement, not to satisfy some activists in FOE. They can sort their own pensions.

  6. Heavens
    Robert Noyes, campaigner and researcher at Platform and a report author says …

    “After a decade of austerity and the devastating economic impact of Covid across the UK, local councils can and should be using their pension funds to support local investment priorities.

    Councils should have nothing to do with the pension funds of their staff – and with the advice from the new Robert Maxwell (Robert Noyes), if I had any cash in a council pension fund that looked like squandering my hard earned cash on local vanity projects, I would remove it immediately.

    I also think its illegal for councils to play the Maxwell with pension funds, and the likes of Noyes should be asking the pensioners, not the council, and then the tax payers.

    And then we have the hindsight experts – using a financial times, no brainer report on the issue. The report concluded that investing in fossil fuels was increasingly costly and a financial risk. It cited a Financial Times article which reported that UK public pension funds had lost £2b on oil investments in the past four years. Well well – lets have a look at that in a year shall we? Is someone de ramping the oil industry to get in at a lower price?

    Plus – what does austerity have to do with it (but must have been an off day – missed Brexit). What does Covid have to do with it (apart from providing a buying opportunity for oil?

  7. Meanwhile, the coal to gas switch is leading to happy times for major oil companies, given the rather skewed data put out by the EU and other anti coal pressure groups. Maybe they are all heavily invested in oil and gas at the bottom of the cycle and happy days from now on (other than getting councils to drop the shares so they can be hoovered at a low price).

    ………Global natural gas demand is set to return to pre-crisis levels as early as this year and will continue to rise in the coming years, thanks to the coal-to-gas switch in Asia, particularly China. The growing gas demand will drive more liquefied natural gas (LNG) consumption and trade, and producers are gearing up for a new cycle of final investment decisions (FIDs) on projects. ….

    Conspiracy theory of course – ?

  8. “A pension is to provide the recipient, who has worked hard for it, with security in their retirement, not to satisfy some activists in FOE. They can sort their own pensions.” Let’s ignore Martin’s jibes and red herrings!
    Krupp and Siemens employees are unlikely to have been presented with a choice in ’33 as to where their employers – as they financially enabled the Third Reich – should invest any pension funds they may have intended to profit from. The same might be said of employees of BASF, Bayer, Agfa, IG Farben, Allianz, and Telfunken. Had this not been the case, and had the employees in question been apprised of, shall we say the moral or ethical ambiguity of the position of their employers, then I like to think some at least might have chosen to act ethically or to “satisfy some activists in FOE” as you so disparagingly put it. Perhaps many more would have done so had they been able to read the omens which pointed to their employer’s involvement at Buchenwald, Sachsenhausen, Ravensbrück, Auschwitz, Mauthausen, Dachau, etc., etc. But they were not so apprised, you will argue, they had no idea what would happen if such deadly enterprises were permitted to flourish. This is true, and yet the signs were there, and became clearer and clearer, by which time the task of washing one’s hands was indeed daunting. But we do know what will happen, (or we are looking the other way), if we continue to subsidise the fossil fuel industry, if we do not send a clear signal by discouraging our employers from funding evil via our pension contributions. We are then complicit.
    If “satisfy(ing) some activists in FOE” is your preferred example for acting ethically with the common good in mind, then let’s continue so to satisfy them. Please.

    • There’s an age old joke where the devil appears and talks to a rich man.

      The devil asks the rich man:

      “Would you sell your soul for a billion dollars?”

      The rich man delivers an enthusiastic:

      “Yes!”

      The devil then inquires:

      “Would you sell your soul for five dollars?”

      Offended, the rich man fumes:

      “Five dollars? What kind of fool do you think I am?”

      The devil then rejoins:

      “We’ve already established that,” . “Now we’re just haggling over the price.”

    • That is just nonsense-again!

      And, if you want to refer to such, then beware. Stopping the press working is no different to burning books. Oh yes, activists.

      “Every electric car sold in the UK is costing the Treasury around £1k in lost fuel and vehicle tax in it’s first year.” So, pretty obvious where the subsidies are.

      Please explain how ethics are served by kids grubbing cobalt-a known carcinogen-in the DRC, and suffering the consequence? And then there is ocean mining.

      So, someone’s “ethics” are not someone else’s. So, who is to determine? Big Brother/FOE? Could Tesla be “allowed” after trashing a forest in Germany?

      If you want to buy a green pension, your choice-and it is there for you to make. It is not the responsibility of employers to do that, and indeed is currently illegal, and certainly not the responsibility of activists.

    • It is the Trustees who decide placement of pension contributions, 1720, not the employers!

      And if those Trustees are not to the liking of the employees, then they have the freedom to use those that are.

      If you want employers to make those decisions, then you need to change the law back to pre Maxwell times, which would be unwise.

      If you believe Council’s should make such decisions, then perhaps take a look at Croydon Council!

      This discussion about pensions is akin to a sex discussion amongst the vestal virgins. Causes a lot of excitement based upon fantasies.

      Please, at least, do some research and have some basic knowledge of the subject.

      • Sorry about this, Martin, I was wrong to assume you’d be capable of following a simple ellipsis. I think most people understand what I mean if I talk about employers investing in a particular pension fund. It’s now common parlance to talk of Councils divesting from fossil fuels without having to refer pedantically to how these Councils actually operate to achieve this, and the various stages and actors involved.
        You’re right though, my knowledge in these areas is extremely limited, although I don’t think this fact invalidates anything I said.
        Once again, your introduction of the ‘vestal virgins’ theme leaves me a trifle puzzled, unless of course you are suggesting we are both fantasizing. How, pray, are you fantasizing? You clearly assume that I am fantasizing on the same subject, hence your simile.
        I suggest we leave the subject there after your answer. You don’t seem to be understanding my arguments, although I’m sure they’ll crop up again.

  9. No wonder planners on the northeast part of England have been less than vigilant in reacting to the ‘Climate Emergency’ by enforcing measures to reduce toxic airborne emissions resulting from the combustion of fossil fuels!

    • Peter K Roberts

      Do you have any evidence that planners are taking decisions based on the holdings in their pension fund?

      And in which council do planners enforce measures to reduce airborne emissions?

      I did see that McWhirter thought that planners were somewhat lacking in empathy, but they are there to ensure the council follows the law in terms of planning issues. But hey, why not pop them into the axis of evil bucket, even if they all cycle to work and vote green.

    • Peter, you have previously stated you worked manufacturing aircraft…

      What exactly is fuelling your pension in retirement?

  10. Perhaps we should be taking all our actions in holistic responsible actions and consider the entire life situation on the planet Earth as each individual decision effects the whole.

    Only then can we say that we can become responsible caretakers of the planet and all life upon it.

    Time to grow up and take responsibility.

    Any other choice is effectively suicidal.

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