The pension funds of half a million public sector workers in Scotland are investing a massive £1.7 billion into fossil fuel corporations, exposing them to financial risk if the so-called ‘carbon bubble’ bursts because of climate pollution.
An investigation by environmental groups has revealed the huge and increasing sums of money local government pension schemes are pouring into coal, oil and gas companies - despite the dangers they pose to the planet.
The investments have been condemned by trade unionists, politicians and pension fund members. They are demanding that councils pull out of fossil fuels, and put their money into clean energy, housing and other socially useful projects instead.
Multi-billion-pound pension funds covering hundreds of public sector bodies are run by 11 local authority organisations across Scotland. Using freedom of information requests, researchers have calculated how much is being invested in major fossil fuel companies.
The total comes to £1,664 million, the equivalent of £311 for every resident of Scotland. The most money - £56m - goes to the coal and metal mining giant, Rio Tinto, followed by £39m to the UK oil company, BP and £33m to the Italian oil firm, ENI.
Other major beneficiaries are Shell, Exxon Mobil, Total, Statoil, Chevron, EOG Resources (formerly Enron) and the German petrochemical producer BASF (see table below). Strathclyde pension fund was the biggest investor in Scotland, with £752m in fossil fuels.
Critics say that the market value of fossil fuels is falling as environmental risks become clearer, and predict they will become worthless as more government action is taken to cut climate pollution. They point to scientific evidence suggesting that 80 per cent should stay in the ground to avoid catastrophic climate change.
Major Scottish bodies including Glasgow and Edinburgh universities and the United Reform Church have already moved to withdraw funds from fossil fuel firms. Globally, approaching 400 institutions have decided to pull many billions of pounds worth of investments.
“Communities around the world are calling for an end the environmental destruction that comes with coal mining, fracking and deep-sea oil,” said Ric Lander from Friends of the Earth Scotland, one of the groups that compiled the data.
“Our pension money shouldn't be fuelling this damage. At a time when public resources are being squeezed, we should be redirecting this money to socially useful projects such housing and clean energy.”
Dave Watson, Scottish organiser for the trade union, Unison, which has 90,000 members in the pension schemes, pointed out that councils had a legal duty to cut carbon emissions. “Divesting from fossil fuels is the prudent way for councils to meet both their fiduciary duty to members and their public law duties,” he argued.
The Green MSP, Alison Johnstone, accused local authorities of playing “reckless games” with their employees' money. “Oil, gas and coal are running out, and the fossil fuel industry is no longer a sustainable, sensible investment choice,” she said.
The Sunday Herald reported in January 2014 that five of the 11 local government pension schemes in Scotland were investing £1.1 billion in fossil fuel companies. The new analysis shows that has increased by £300 million to £1.4 billion, suggesting that investments are rising overall rather than falling.
Independent councillor Jim Orr, a member of Edinburgh City Council’s pensions committee, described fossil fuels as “unsustainable and hugely damaging”. He called on pension scheme members to pile on pressure for investment strategies to change.
Kirsty Noble, who is a member of the Strathclyde pension fund, urged councils to take the lead. “These investments are increasingly risky and local authority funds seem to be overexposed to this risk,” she said.
According to the Convention of Scottish Local Authorities (COSLA), pension investment strategies were regularly reviewed. “Each fund needs to balance various priorities for investment together with the responsibility to ensure that they achieve a decent return on investment,” said a COSLA spokesman.
“The picture across Scotland is more varied than has been suggested with many funds investing in environmentally responsible companies and in local infrastructure projects.”
Oil and Gas UK, which represents over 500 companies, didn’t want to comment on the commercial decisions of individual organisations. But it stressed that everyone’s daily life depended on ready access to energy.
“Global population is projected to grow by 20 per cent over the next twenty years and energy demand rise by one third as the quality of life improves in many countries around the world,” said the group’s economic director, Mike Tholen.
“Even with rapid growth in renewables and significant improvements in efficiency, oil and gas will be needed to supply at least 50 per cent of global energy demand in 2035. Divestment of oil and gas is not the solution and will only make the challenge of meeting global energy demand all the greater.”
This was disputed, however, by 350.org, the environmental group leading the growing divestment movement. “Public investments in fossil fuels are fuelling dangerous climate change, and present a threat to pensions,” stated the group’s Danni Paffard.
“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.”
Where your pension fund goes
fossil fuel company / total investment by Scottish local authority pension funds
Rio Tinto / £56.1m
BP / £39.3m
ENI / £33.1m
Royal Dutch Shell / £31.2m
Exxon Mobil / £30.5m
Total / £22.5m
BASF / £18.8m
Statoil / £15.5m
Husky Energy / £13.9m
EOG Resources / £13.2m
BHP Billiton / £5.8m
Suncor Energy / £3.4m
Apache / £3.1m
BG Group / £3.1m
Marathon Oil / £2.8m
Inpex / £1.5m
source: Scottish local authority pension schemes/Friends of the Earth Scotland