Council-run pension schemes ‘funnelling £8bn into oil and gas expansion’

That is according to Friends of the Earth, which gained the information by working with the Bureau of Investigative Journalism to put Freedom of Information requests to Local Government Pension Schemes (LGPS).

The requests found that the average scheme in London has 4% of its portfolio invested in fossil fuels. This falls to 2% in Wales, where the Government has mandated that LGPS must divest from fossil fuels by 2030.

It bears noting that, in England and Wales, more than one in five councils now invest less than 1% of their pension funds into fossil fuels. Just three years ago, the proportion was ten times lower. This does evidence a general trend towards divestment.

Nonetheless, there are some major funds bucking this trend, meaning that £16bn is still held in fossil fuels. £8bn of this is going towards companies actively exploring oil and gas expansion, of which £4bn is invested in projects in the North Sea led by the likes of Shell, BP, TotalEnergies, Ithica Energy and Equinor.

Just 10% of the LGPS in the UK hold half of all of the £16bn of investment in fossil fuels.  The research unveiled the Greater Manchester Pension Fund and West Yorkshire Pension Fund as the worst offenders with more than £1bn of fossil fuel investments each.

Manchester City Council has notably set a 2038 net-zero target for its own operations and for public services like schools and public transport. The Greater Manchester Combined Authority has stated its support for this vision.

The West Yorkshire Combined Authority has the same net-zero deadline year.

Friends of the Earth climate coordinator Jamie Peters 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.”

More than six million Brits have their retirement savings in LGPS. Friends of the Earth are arguing that investments in fossil fuels are risking the long-term sustainability of their pensions because fossil fuel assets with either end up stranded due to the low-carbon transition or will operate and jeapordise the delivery of the Paris Agreement.

Beyond just LGPS, Make My Money Matter previously estimated that UK-based pension schemes collectively have more than £88bn invested in fossil fuels.

The International Energy Agency’s (IEA) updated roadmap to a global net-zero energy system by 2050, in line with 1.5C, includes an end to all oil and gas extraction expansions beyond that already agreed upon before the end of 2021.

It also includes an immediate end to the development of any new coal mines, any coal mine extensions and any new unabated coal-fired power plants. These changes would feed in to a 25% decrease in fossil fuel demand this decade.

Related news: Pension funds warned that they are dramatically underestimating climate risks