September 24, 2015

Mass data release: £14 billion risky fossil fuel investments by UK councils revealed

Data released today shows UK local authorities  have invested £14 billion of their pension funds into fossil fuels. This is the first time that the £231 billion investments of all 418 local councils have been broken down and released publicly. The data ranks local councils by their fossil fuel exposure and reveals both the financial threat to pensions and the climate risks.

“Public investments in fossil fuels are fuelling dangerous climate change, and present a threat to the pensions of 4.6 million public sector workers. There’s a strong ethical and financial case for local councils to divest from fossil fuels and reinvest into infrastructure fit for the 21st century.” Danni Paffard of 350.org

The data and online map released by 350.org, Platform, Community Reinvest and Friends of the Earth ranks councils by their fossil fuel investments, and allows residents to see what their local council has invested into. The data suggests councils are failing to properly manage the financial risks of investments in fossil fuels nor take responsibility for climate action.

The accompanying briefing analysing the data for Local Authority Pensions shows:

  • UK local councils have invested £218 per resident into risky fossil fuels. Greater Manchester invests £483 per resident.
  • The largest investments have been made by Manchester (£1.3 billion), Strathclyde (£750m) and West Yorkshire (£670m).
  • Over 6% of local government pensions are invested in fossil fuels. Merton (11%), Worcestershire (10.7%) and Camden (9.5%) have especially high exposure.
  • Three quarters of direct fossil fuel shareholdings are in only ten companies, headed by BP and Shell.

Reinvesting the £14 billion of fossil fuel shares into local infrastructure could enable UK councils to safeguard pensions and generate sustainable returns by:

  • Building over 200,000 new homes for social housing, or
  • Placing solar panels on 2 million homes, 10,000 schools and 20,000 public buildings, adding 8.9 GW of electricity capacity – more than Scotland consumes.

“Instead of wasting £14 billion of public pensions on multinational climate wreckers, we could reinvest into renewables and housing that serve local residents, create jobs and safeguard pensions.” Mika Minio of Platform

“We don’t want fossil fuels to destroy our pensions, and we don’t want our pensions to destroy everyone’s future.” – Jane Ivimey, a local authority pension-holder and member of Fossil Free Oxfordshire

12 new local campaigns calling for their council to divest from fossil fuels will also launch today, adding to the 18 existing initiatives. Oxford and Bristol City Councils have already taken a lead in making fossil free commitments, joining 50 cities internationally and larger institutions like the Norwegian Government Pension Fund. There are over 400 institutions globally that have committed to divest with an asset base of $2.3 trillion.

“Most of the world’s oil, coal and gas has to stay in the ground to prevent runaway climate change. Local government can help protect all our futures by taking pension investments out of these planet-wrecking corporations.” –  Simon Bullock , senior climate and energy campaigner at Friends of the Earth

“Local residents and pension-holders won’t be happy that their money is funding climate change. Today we’ll be calling on Greater Manchester to stand on the right side of history and divest from fossil fuels.”  Ali Abbas, Friends of the Earth Manchester, launching a campaign today targeting the Greater Manchester Pension Fund.

Campaigns to divest have been boosted by increased awareness of the financial risks to investors of ‘stranded’ fossil fuel assets, associated with (but not exclusive to) the need to leave 80% of known fossil fuel reserves unburnt to prevent catastrophic climate change. The Bank of England and G20 Financial Stability Board are currently investigating the risk to the economy of the ‘Carbon Bubble’. A recent analysis found that California’s public pension funds, CalPERS & CalSTRS, incurred a combined loss of over $5 billion in the last year alone from their holdings in the top 200 fossil fuel companies.

“There is a growing body of evidence suggesting that the financial risks associated with climate change will impact investment portfolios. If pension fund trustees fail to properly manage these risks in their investment decision-making process, and there is a consequential decline in value of the pension pots of members, then trustees and investment managers could be sued for breaching their fiduciary duties.”Natalie Smith, Lawyer of Client Earth

In March 2014, following a clarification from the UK Law Commission on the interpretation of fiduciary duty, the Local Government Association (LGA) (England & Wales) published a legal opinion on how fiduciary duties affected the scope for a Local Government Pension Scheme (LGPS), concluding that “the precise choice of investment may be influenced by wider social, ethical or environmental considerations, so long as that that does not risk material financial detriment to the fund.”

Contacts for interview:

Danni Paffard – danni@350.org – 07979817888

Mika Minio-Paluello – mika@platformlondon.org – 07733466038

For contacts to local campaigners, contact Danni Paffard

For access to the summary data sheets, contact Mika Minio

Scotland enquiries: 0131 243 2715 / rlander@foe-scotland.org.uk

Wales enquiries: Bleddyn Lake 07795098294 / bleddyn.lake@foe.co.uk

Notes to editor

  1. Data can be accessed at http://gofossilfree.org/uk/pensions/ 
  2. This data is released as part of an ongoing campaign through Fossil Free UK to secure fossil free divestment commitments from local governments, backed by 350.org, Platform, Community Reinvest and Friends of the Earth. Friends of the Earth here refers to Friends of the Earth Scotland and Friends of the Earth, England, Wales & Northern Ireland. Fossil Free UK is a grassroots network, with all campaigning on local government lead by volunteer groups across the country.
  3. The £231 billion pension pots are managed by 101 Local Government Pension Scheme Funds.  They are administered on behalf of 418 local authorities, including members from local schools, public transport, third sector organisations, and other civic institutions. Local councils make up a significant majority of the contributing employers.
  4. A divestment commitment is a principled commitment to wind down exposure to the Carbon Underground top 200 fossil fuel companies over a 5 year period.
  5. Most of the information released today was not publically available. The data was sourced by 350.org, Community Reinvest and Platform through Freedom of Information Act requests to the 101 administering pension funds for the 2013/4 financial year. The full data is being released at http://gofossilfree.org/uk/pensions/ This includes spreadsheets for each pension fund with a breakdown of investments.  For the first time, pension holders, taxpayers, and residents have transparency over the scale of fossil fuel investments by their council.
  6. The briefing analyses the data and includes references and calculations for all statements in this press releases. It includes a Methodology explanation for the process of sourcing, collating and analysing the data
  7. The Local Government Pension Scheme is one of the largest public sector pension schemes, with 4.6 million members nationally.
  8. The 2014 Law Commission clarification on fiduciary duty concluded “that there is no impediment to trustees taking account of environmental, social or governance factors where there are or may be, financially material” and that environmental concerns may also be taken into account as a non-financial factor so long as there is there is no “significant impact on returns” and “trustees have a good reason to think that scheme members would share the concern.”
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