£16bn of UK local government pension funds’ capital invested in fossil fuels

The UK's Local Government Pension Scheme (LGPS) funds have £16bn invested in the fossil fuel industry, according to a new analysis.

The research by environmental campaigners Platform and Friends of the Earth revealed that £8bn of LGPS funds' capital is invested in companies developing new oil and gas projects. 

It also found that 10% of funds hold over 50% of LGPS fossil fuel investments, with over 20% of funds committing less than 1% of their portfolio to non-renewables. According to Platform and Friends of the Earth, this is a 10-fold increase since 2020 when the last analysis was conducted.

The £396bn LGPS is one of the largest pension schemes in the UK, with more than 6.1m members working in local government or for other employers that participate in the programme. It is administered locally by 86 pension funds in England and Wales.

In addition, the research found a geographical variance,  with pension funds in England investing on average 4% of fossil fuel exposure in their portfolio compared to just 2% in Wales and London.

The campaigners stated that this reflects the Welsh government’s support for fossil fuel divestment in 2022 and local leadership in London sustaining action on fossil fuel divestment and investment. They added that the total £16bn of fossil fuel investments by the LGPS amounts to double the total market size of all renewable energy generation in the UK in 2022.

In a breakdown of the analysis, it revealed that the Greater Manchester Pension Fund (GMPF) and West Yorkshire Pension Fund (WYPF) both invest over £1bn in fossil fuels. It also highlighted that 27% of the £1.3bn London Borough of Barking and Dagenham Pension Fund is invested into fossil fuels.

Net Zero Investor has contacted all three of these pension funds for a comment. The London Borough of Barking and Dagenham Pension Fund told Net Zero Investor that they “do not recognise this figure, but are looking into it”, whilst GMPF and WYPF did not respond by the time of publication.

On the other hand, the research also revealed the funds with the lowest proportion of their investments in fossil fuels, with Hammersmith and Fulham at 0%, the London Borough of Waltham Forest at 0.17%, the London Borough of Newham at 0.18% and Swansea at 0.18%.

Platform and Friends of the Earth’s research was conducted through Freedom of Information requests and analysed 75% of the assets under management of the £369bn LGPS. Both campaigners are calling on funds to stop funding fossil fuels as these investments are turning “public savings into fossil fuels playthings”.

Jaime Peters, climate coordinator at Friend of the Earth, said: “It’s time to ditch financially risky holdings in gas, coal and oil, and invest in accelerating the transformation to a carbon-free future.”

Rob Noyes, divestment campaigner and researcher at Platform, added: “To catch-up on climate, council’s must stop using pensions to prop up this deadly industry."