Pensions fuelling climate risks

Campaigns, Fossil fuels, North Yorkshire Council

Pensions fuelling climate risks as £16 billion of the Local Government Pension Scheme (LGPS) is invested in the fossil fuel
industry, according to new analysis by Platform and Friends of the Earth.

Despite warnings that investors should not fund new oil and gas projects, local authorities including North Yorkshire Council are still funding fossil fuel expansion, with over £8 billion of pensions invested in companies developing new oil and gas projects. These investments are turning “public savings into fossil fuel playthings,” say environmental campaigners.

“Expansion of fossil fuel production is not in line with Net Zero,” the Climate Change Committee warned this year calling on industries to move away from high-carbon developments. Despite this, the total value of fossil fuel investments by local government pensions amounts to double the total market size of all renewable energy generation in the UK in 2022. It also exactly matches the £16 billion investment the UK Government is looking to unlock through its Levelling Up Fund.

With virtually all oil and gas companies set to expand their operations campaigners are calling on pension funds to stop pensions fuelling climate risks by funding fossil fuels. The research, conducted through Freedom of Information requests, reveals a variance in approach to fossil fuel investment across UK local government pensions. In London, where local leadership has taken sustained action on fossil fuel divestment, investment by local government pension funds is nearly half the national average. Additionally:

*Just 10% of funds hold over 50% of LGPS fossil fuel investments – with Greater Manchester Pension Fund & West Yorkshire Pension Fund each investing over £1 billion into fossil fuels.

*By contrast over 20% of local councils now invest less than 1% of their fund into fossil fuels – a 10 fold increase since 2020, the last time analysis was conducted.

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

*Two funds with the lowest proportion of their investments in fossil fuels also came from Wales – reflecting the Welsh Government’s support for fossil fuel divestment in 2021/22.

The analysis covers data taken from the 2021/22 financial year. A digital tool  maps investments onto fossil fuel assets and international operations is available (from 23 October).

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, council’s 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.”

Fossil Free North Yorkshire’s campaign to get North Yorkshire Council’s Pension Fund to divest from fossil fuels and reinvest in sustainable green projects was discussed on 13 October at a Let’s Talk Money workshop organised by Settle Justice and Peace and you can find out more here.

The full Friends of the Earth news release can be read here.