Scottish pension funds are investing heavily in the companies contributing to climate change, according to a report published by Scottish think tank Common Weal, trade union UNISON Scotland, and environmental charity Friends of the Earth Scotland.
According to the report, Scottish council pension funds have £1.68 billion ($2.05 billion) invested in fossil fuels, which translates to £3,300 for each pension fund. This is in contrast to £234 million invested renewables and social housing across all funds.
“Council pension funds have huge clout and can shape our future. It’s time they used this power to invest in a future worth living in,” said Friends of the Earth Scotland’s Ric Lander, who authored the report. “Divesting from fossil fuels is an opportunity to contribute to a brighter future and put money back into local economies.”
The £1.68 billion represents 4.8% of the total value of the plan. Approximately £637 million of this was directly invested by councils, of which £543 million is invested in oil and gas, while £113 million is invested in coal. Some £1.05 billion of the funds that Scotland’s councils hold in fossil fuels is invested through intermediaries.
“Councils invest in companies such as BP, who are fracking and drilling for oil in the Arctic as well as having a history of campaigning against subsidies for renewable energy, and BHP Billiton, the 12th-largest extractor of coal in the world,” said the report.
Because the value of fossil fuel companies is directly linked to the amount of coal, oil and gas that companies can burn, the report argues that any action that governments take to tackle climate change threatens the future profitability of fossil fuel companies, and thus the pensions funds that invest in those companies.
“There is a strong financial case to say that government action on climate change makes fossil fuel investments inherently risky, and that they should be avoided by long-term investors,” said the report. “The future of pension funds is intrinsically linked with that of the wider economy. They will not be able to escape the damage that fossil fuels will wreak on our future economy. If this case is understood, divestment is simply an act of self defense for investors.”
The report also found that only six of the 11 Scottish councils that manage pension funds have ever discussed climate change at the board level. And only three councils are known to be actively investing in socially and environmentally beneficial infrastructure. The Strathclyde, Falkirk and Lothian Pension Funds invest in renewable energy and social housing, however, their combined investment represents just 0.7% of the Scotland-wide plan’s value.
Scotland is divided into 32 council areas. The Scottish Local Government Pension plan is worth £34.7 billion, and has more than 500,000 members. The plan’s advisory board estimates that 10% of Scots are a member of the fund, and that 20% of the population have a financial interest in the fund.
“Too many of our pension funds are investing in obsolete technologies and risking our members hard-earned contributions,” said UNISON’s Scottish Organizer Dave Watson. “The future of energy is green, and it is within sight. Our pension funds need to be part of the future, not the past.”
By Michael Katz