There has been no significant reduction in the level of fossil fuel investment by local council pensions since the Paris climate deal was agreed two years ago, according to new data.
The research, compiled by environmental groups 350.org, Platform, Energy Democracy Project and Friends of the Earth, shows that councils currently have £16.1bn of their workers’ pensions invested in oil, gas and coal companies. This represents 5.5 percent of their total investments, worth £287.9bn.
While the value of these investments has increased since 2015 (when the market value represented £14bn), the proportion of the pension funds invested in fossil fuels has stayed about the same.
According to the groups’ press statement, this shows that “councils have not made any significant changes to their investments in response to calls from the climate movement, governments, and shareholders to take climate risk into account, in the two years since the Paris Agreement on climate change.”
Under the Paris Agreement, global economies have committed to limit global warming to two degrees above pre-industrial levels, with an ambition to keep the temperature rise to 1.5 degrees. Analysts suggest achieving this will require fossil fuels to be phased out, with around 80 percent of known reserves left in the ground.
That means companies heavily invested in fossil fuels are currently potentially overvalued. Pensions, educational institutions, faith organisations, governments with fossil fuel investments are therefore exposing themselves to a large amount of risk. That’s why they should move their investments out of fossil fuel assets, also known as divestment, campaigners argue.
Councils and Companies
Councils with the highest exposure to fossil fuel investments include Manchester (£1.7bn or 10 percent), Dumfries and Galloway (£78m or 9.4 percent), Torfaen (£245m or 9.1 percent), Hammersmith and Fulham (£90m or 9 percent), and Merseyside (£243m or 8.9 percent)
The data compiled by the campaign groups shows each council’s five largest fossil fuel investments. Combing through the information shows that Shell appears most frequently among councils’ largest investments, with at least £1.8bn invested across the pension funds.
This is followed by BP, with the funds having at least £1.16bn invested in the company. The funds also have at least £203m invested in Centrica and £72m in ExxonMobil.
Companies involved in US fracking are also a popular choice with the funds investing at least £84.5m in Anadarko Petroleum, Pioneer Natural Resources, Marathon Oil, EQT, Cabot Oil and Gas, Noble Energy, as well as Chevron and ConocoPhillips. Nearly half of this amount (£40.7m) is invested in just one fracking company: EOG Resources, an independent company headquartered in Texas.
It’s worth noting that the data is not comprehensive as some councils don’t disclose specific companies. As only the companies that are one of the council’s top five investments for each pension are shown, the figures and spread of companies is likely to be much higher.
Ellen Gibson, divestment campaigner with 350.org said: “With hurricanes devastating the Caribbean, wildfires ravaging southern Europe and flooding and drought destroying lives across the world, the impacts of climate change are hitting hard.
“Despite this, UK councils are still plowing billions into companies like Exxon, Shell and BP who have spent decades fuelling the crisis, and profiting on its back. Climate change isn’t a problem for future generations – it’s happening now, and action has never been more urgent.”
While the data shows little movement to divest council pensions from fossil fuels, this doesn’t mean local authorities aren’t working to take some action.
Over the past year several councils have committed to partially divest, including Hackney and South Yorkshire as well as the Environment Agency pension fund. Meanwhile Waltham Forest and Southwark councils have committed to fully divest.
Typically, councils commit to divest over a five-year period, which explains why the data still shows the authorities holding fossil fuel investments.
Last June, UNISON, the largest trade union representing government workers in the UK, passed a policy to “seek divestment of Local Government Pension Schemes from fossil fuels over five years giving due regard to fiduciary duty.”
As Anna Galkina, Platform’s press officer, told DeSmog UK: “Much of the time, council officials try to put the interests of the pension holders, the stable future returns of pensions, against making any kind of active choice about their investment. UNISON’s policy makes clear that pension-holders would like that active choice to be made.”
There are also a couple of councils which have started investing their pensions in clean energy. Strathclyde Pension Fund invested £10 million in Albion Community Power, for example, which owns hydropower stations. Lancashire County Council has £12m invested in a community-owned solar farm, Westmill Solar Co-operative.
Photo: Kevin Kelley via Flickr | CC2.0