Dirty pensions: £10 billion still invested in fossil fuels by local government pension funds
Financial figures updated to reflect further information received from West Midlands Pension Fund, after the report had been written
Despite over 75% of local councils declaring a climate emergency, billions of pounds are still invested in planet-wrecking fossil fuels through local government pension funds.
Freedom of information requests by environmental campaigners found that, despite decreases in recent years, UK local government pensions held £9.7 billion of investments in fossil fuel companies in the 2019/20 financial year. The analysis shows these pension funds are still making millions of people complicit in funding planet-destroying industries.
The report – by Platform, Friends of the Earth (England, Wales, and Northern Ireland), and Friends of the Earth Scotland – is the most up-to-date review of how much local authority pension funds invest in some of the most harmful fossil fuel companies in the world.
The campaign groups have also created a dashboard which allows anyone to explore their local authority pension fund's investments in more detail, including which companies they hold direct or indirect shares in, and how their fossil fuel investments stack up compared to other funds.
The 4 local authority pension funds with the largest investments in fossil fuel are Greater Manchester, Strathclyde, West Yorkshire, and West Midlands. Together, these funds account for nearly 25% of all fossil fuel investments held by local authorities in the UK. The 3 local authority pension funds with the largest percentage of their assets invested in fossil fuel are Teesside, Dyfed and Dorset - all of which invest around 5% of their pension fund total value into fossil fuels.
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.”
Robert Noyes, Campaigner & Researcher at Platform and 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.”
The analysis*, based on the end of the 2019-2020 financial year and using a list of the world’s 200 biggest extractors of fossil fuels, shows that:
- UK local government pensions invest £9.7 billion in fossil fuels
- That’s at least £1,420 invested in fossil fuels for each of the 6.8 million people who depend on local government pension funds across England, Wales, Scotland and Northern Ireland
- Fossil fuels represent 3% of the total value of the Local Government Pension Scheme (LGPS). Coal accounts for 34% of fossil fuel investments and oil and gas accounts for 66%.
- 7.1 billion (72%) of fossil fuel investment, takes place indirectly through investment funds which invest local government pensions in fossil fuel companies.
- Looking at direct and indirect investments together, £3,364 million (1.0%) of local government pension fund investment is in coal and £6,459million (2%) is in oil and gas
- Ten companies account for 70% of councils’ direct fossil fuel investments. Of these ten companies, BP, Royal Dutch Shell and BHP account for 40% of all direct investments .
*These results likely underestimate fossil fuel exposure, as they only account for investments in the 200 biggest fossil fuel companies.
Southwark, Islington, Lambeth, Waltham Forest, and Cardiff councils, as well as the Environment Agency, have already committed to divest fully away from fossil fuels.
- Read the full report by Friends of the Earth (England, Wales, and Northern Ireland), Platform, and Friends of the Earth Scotland Divesting to protect our pensions and the planet: an analysis of local government investments in coal, oil and gas here.
- This provides a breakdown of the investments in oil, gas and coal of every local authority pension fund. The work builds on similar analysis carried out by the same organisations in 2015 and 2017.
- Out of the 98 local authority pension funds that were considered in the analysis, 13 were removed from the main sample that we screened for fossil fuel investments because they failed to provide sufficient data. Estimated values were used for these funds (a breakdown of investments and research methodology can be found in Appendices 1 and 2 of the report preview.)
- The amount invested in fossil fuels is now £9.7 billion.
- Visit divest.org.uk/councils to explore your local authorities’ investments in detail.
- Investing in fossil fuels is not the sound investment that the industry paints it as. Regular warnings from financial bodies reveal that investing in fossil fuels carries significant financial risk, at a time when technology like renewable energy is becoming more secure as an investment option.
- The value of oil company shares held by 56 local government retirement schemes has halved since 2017
- Financial institutions such as the International Monetary Fund, HSBC, Standard & Poor’s, Bloomberg and the Bank of England have warned about the financial risk of fossil fuel investments, which is referred to as the ‘carbon bubble’.
- MSCI, who run global indices used by 6000 pension and hedge funds, found that investors who divested from fossil-fuel equities would have earned an average return of 13% a year since 2010, compared to the 11.8%-a-year return earned by “conventional investors.”
- About Platform: Platform is a UK-based environmental and social justice collective with campaigns focused on the global oil industry, fossil fuel finance, and building capacity toward climate justice and energy democracy. For more information visit https://platformlondon.org/ and follow us at @PlatformLondon
- About Friends of the Earth: Friends of the Earth is an international community dedicated to the protection of the natural world and the wellbeing of everyone in it. We bring together more than two million people in 75 countries, combining people power all over the world to transform local actions into global impact. For more information visit: https://friendsoftheearth.uk/ follow us at @friends_earth, or like our Facebook page
- About Friends of the Earth Scotland:
- Scotland’s leading environmental campaigning organisation
- An independent Scottish charity with a network of thousands of supporters and active local groups across Scotland
- Part of the largest grassroots environmental network in the world, uniting over 2 million supporters, 75 national member groups, and 5,000 local activist groups. www.foe.scot