Fossil fuel investments pose risk to council pension funds

Warning of legal challenge over failure to act on climate change

SCOTTISH councils are putting their pension funds at risk and face a possible legal challenge by failing to ditch investments in companies most responsible for climate change, according to a new report.

While £1.7 billion is being invested in fossil fuel firms, just £234 million is being invested in renewable energy and social housing across all Scotland’s council pension funds.

According to a study by think tank Common Weal the amount invested in fossil fuel companies has not changed despite governments around the world signing up to tackle climate change in Paris in December, 2015.

The report looked at investments in 2016/17 says that while no council has yet made any commitment to divest from fossil fuel companies, eight universities and churches in Scotland have.

Nearly five per cent of the £35.4bn Scottish Local Government Pension Scheme is invested in fossil fuels with £543 million directly invested in oil and gas and £113m in coal.

The report says that just six of the 11 Scottish councils who run pension funds have ever discussed climate change at board level.

The Dumfries and Galloway fund tops the list of Scots council fossil fuel investors with 10.2 percent of its £692m scheme, followed by Shetland with 8.2 per cent and Falkirk with 6.5 per cent.

The Strathclyde Pension Fund, the biggest council run scheme in Scotland, has the most invested in fossil fuel companies. Their £889m stake makes up 5.5 per cent of its portfolio.

By contrast, the £6 billion Lothian scheme, the second biggest council-run pension fund in Scotland, has just 1.7 per cent (£102m) in fossil fuel companies, the lowest of the 11.

Royal Dutch Shell was the most favoured fossil fuel company investment, with nearly £130m worth of equity held across the local government pension fund investors.

The study says that by continuing to invest in the companies most responsible for global climate change, councils are “failing to protect their pension fund members’ best interests and risk losing huge sums as government action to curb climate emissions sees fossil fuel companies’ value plummet”.

It warns: “Council pension funds that fail to act on climate change will risk heavy losses and face the possibility of a legal challenge. If investors continue with business as usual the risk of financial and environmental catastrophe will only grow.

“Pension funds are dependent on the future of the world economy and have the power to shape it. Councils must be willing to influence the pensions industry to ensure we all have a future worth retiring for.”

Ric Lander, divestment campaigner at Friends of the Earth Scotland and the report’s author said just three Scottish councils were found to be actively investing in socially and environmentally beneficial infrastructure.

The Strathclyde, Falkirk and Lothian Pension Funds invest a combined £234m in renewable energy and social housing.

Unison’s Scottish Organiser Dave Watson said: “Too many of our pension funds are investing in obsolete technologies and risking our members hard-earned contributions. The future of energy is green, and it is within sight.”

‘‘ If investors continue with business as usual the risk of financial and environmental catastrophe will grow