UK local authority pension funds are estimated to hold £16 billion in fossil fuel investments, according to new analysis published today.

The research, by the climate campaign organisations, Platform and Friends of the Earth, calculated that more than £8 billion invested by the Local Government Pension Scheme (LGPS) was in new oil and gas projects.

This was despite warnings from energy and climate leaders about the investment risks of new oil and gas projects.

These investments were turning “public savings into fossil fuel playthings,” the organisations said.

With most oil and gas companies looking to expand their operations, the campaigners called on pension funds to stop funding fossil fuels.

According to the research, fossil fuel investments by local government pension funds in 2021-2 represented £2,306 for every pension fund member.

The total value of fossil fuel investments was double the total market size of all renewable energy generation in the UK in 2022, the researchers said.

But the analysis found that individual funds took very different approaches to fossil fuel investment.

Of nearly one hundred funds, just two, Greater Manchester and West Yorkshire, had nearly a quarter of local authority fossil fuel investments. These funds held more than £1bn in fossil fuels. Just 10% of all the UK funds held 50% of fossil fuel investment, the analysis found.

The researchers reported that Greater Manchester, East Riding of Yorkshire and Worcestershire invested more than 7% of their fund in fossil fuels.

But more than a fifth of local government pension schemes invested less than 1% of their fund in fossil fuels – a 10-fold increase since 2020, the last time analysis was conducted.

Platform and Friends of the Earth found that pension funds in Wales and London were reducing their investment in fossil fuels faster than anywhere else in the UK. The organisations said this followed pressure from the Welsh government and the London mayor.

In London, fossil fuel investment by local government pension funds was nearly half the national average. The two funds with the lowest proportion of their investments in fossil fuels were from Wales.

Pension funds in England were found to invest nearly 4% of their fund into fossil fuels, compared to just 2% in Wales and London.

Rob Noyes, divestment campaigner and researcher at Platform, said: 

“Investments in dirty fossil fuels turn public sector savings into fossil fuel playthings, pumping billions of pounds through the pensions pipeline into climate-wrecking fossil fuels. This money is syphoned from workers’ wages and squandered, when it should be fuelling the green and just transition that we so desperately need. Polluters are profiting at pensioners’ expense. To catch-up on climate, councils must stop using pensions to prop up this deadly industry.”

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.”

In September 2023, the head of the International Energy Agency, Fatih Birol, warned countries and companies planning to expand fossil fuel production that they were taking “very unhealthy and unwise economic risks” because investments may not be profitable.

In June 2023, the Climate Change Committee, which advises the government, said expansion of fossil fuel production was “not in line” with the UK’s net zero plans.

Methodology

The researchers sent freedom of information requests to all UK LGPS for fossil fuel investments in the financial year 2021-2.

Where data was not provided, they collected information by analysing publicly-available documents, including annual reports and pension fund committee meeting minutes. The data collected represents 75% of the total UK LGPS.

Data on activities upstream oil and gas companies was collected from the Global Oil and Gas Exit List (GOGEL). This provides data on more than 900 companies, covering 95% of oil and gas production, 97% of oil and gas short-term upstream expansion and 95% of oil and gas capital expenditure.

Data on coal-producing companies was collected from the Global Coal Exit List (GCEL).

The UK LGPS investments were screened for fossil fuels by matching International Security Identifiers (ISINs) for each asset to fossil fuel companies in the GCEL and GOGEL databases. ISINs are 12-digit codes which are used to uniquely identify public investment, such as equities and bonds traded on global stock exchanges. If assets did not have an ISIN, they were excluded from the analysis.

The researchers said pension funds in Wales provided less data than other funds, which meant a lower proportion of these funds were screened for fossil fuels.