Billions in local government pensions invested in fossil fuels, analysis reveals

Environmental campaign groups analysed data gathered through Freedom of Information requests

Billions in local government pensions have been invested in the fossil fuels industry, according to a new analysis.

Environmental campaign groups Friends of the Earth and Platform London analysed data gathered through Freedom of Information requests.

The groups said they were able to analyse data covering 75 per cent of the assets under management for the Local Government Pension Scheme (LGPS) – one of the largest schemes in the country – for the financial year 2021/2022.

They found at least £12.2b invested in fossil fuels – £10.4b in England, £1.4b in Scotland, £227mn in Wales and £28mn in Northern Ireland.

Insufficient data was provided to screen for fossil fuel holdings in the remaining 25 per cent of assets under management, the group said.

They instead estimated that a total of £16b could potentially be invested in fossil fuels based on the same proportions found in the figures they were able to analyse.

It’s time to ditch financially risky holdings in gas, coal and oil, and invest in accelerating the transformation to a carbon-free future.

Jamie Peters, Friends of the Earth

Of that, they estimated that more than £8b could be invested in companies developing new oil and gas projects.

It comes after the government held a consultation on plans for a climate risk reporting framework for the LPGS in England and Wales, which closed in November 2022.

Local government minister Lee Rowley said the government would not be implementing any requirements related to governance or disclosure of climate-related financial risks before April 2024, according to a letter sent to the LPGS Scheme Advisory Board, seen by the PA news agency.

The campaigners said the investment is undermining local efforts to achieve net zero and called on schemes to “dump these dated fossil fuel assets”.

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.”

The campaigners also found that the level of money invested in fossil fuels varied across UK local government pensions.

In London, investment is nearly half the national average after local leadership has supported fossil fuel divestment.

Two funds with the lowest proportion of their investments in fossil fuels came from Wales, reflecting the Welsh government’s support for fossil fuel divestment in 2022.

However, Greater Manchester Pension Fund and West Yorkshire Pension Fund each invest over £1b into fossil fuels,

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.”

A spokesperson for the Local Government Association said: “Investment decisions relating to LGPS funds are made at a local level by a pensions committee made up of elected councillors, they consider their fiduciary duty to members and taxpayers when making decisions, along with other relevant considerations.

“LGPS funds have to invest in line with regulations and statutory guidance issued by the Department for Levelling Up, Housing and Communities which requires them to take and act on proper advice in assessing the suitability of their investments.”