Is this what you want your pension fund to finance? Open pit coal mine near Hailar, Inner Mongolia. Photo: Herry Lawford via Flickr (CC BY).
Exposed: UK Councils' £14 billion fossil fuel gamble
24th September 2015
UK local authorities have £14 billion invested in fossil fuels, campaigners revealed today. Now they should re-invest it in solar energy, new housing and other areas that generate local and global benefits - as well as providing better security for pension holders.
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.
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", said Danni Paffard of 350.org, which compiled the data.
"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."
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.
According to 350.org, 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 that:
- 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.
Get out of fossil fuels, invest in housing and clean energy!
Reinvesting the £14 billion of fossil fuel shares into local infrastructure including renewable energy could enable UK councils to safeguard pensions and generate sustainable returns, says Mika Minio of Platform:
"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."
The sum is sufficient, he points out, to build over 200,000 new homes for social housing, or to place solar panels on 2 million homes, 10,000 schools and 20,000 public buildings - adding about 9GW (billion watts) of electrical capacity - more than doubling the UK's current solar base of around 7GW.
Not only would such investments provide real benefits to local communities, they could also prove to be much better investments than fossiul fuels, which have had a shaky ride this year due to the ever collapsing oil price, compounded by investor fears of holding 'unburnable' carbon assets.
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. The California pension fund has now joined the divestment movement.
"There is a growing body of evidence suggesting that the financial risks associated with climate change will impact investment portfolios", said Natalie Smith, a lawyer at Client Earth.
"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."
New local campaigns launching today across the UK
A dozen local campaigns calling for their council to divest from fossil fuels are also launching today, adding to the 18 existing initiatives.
"Local residents and pension-holders won't be happy that their money is funding climate change", said Ali Abbas of Friends of the Earth Manchester, launching a campaign today targeting the Greater Manchester Pension Fund, which holds £1.3 billion in fossil fuel shares - £483 for every resident. "Today we'll be calling on Greater Manchester to stand on the right side of history and divest from fossil fuels."
Green Party mayoral candidate for London Sian Berry added: "Pensions are all about the future and fossil fuels are an incredibly short-sighted investment all public pensions should avoid. Investing in new green industries would help get London's economy ready for the long term, creating jobs that benefit local communities and greater resilience at a time when our city is increasingly vulnerable to the changing climate."
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 389 institutions globally that have committed to divest.
Individual and instutitional divestment pledges now amount to a massive $2.6 trillion, it was announced this week - a 50-fold increase on a year ago. Recent joiners include Leonardo di Caprio and his Foundation, and the city of Newcastle in Australia - home to the world's biggest coal port.
Campaigns to divest have been boosted by increased awareness of the financial risks to investors of being left owning 'stranded' fossil fuel assets, associated with 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'.
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).
The conclusion is one that can only boost the diverstment movement: "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."
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