COP26: Lancashire County Council pension fund puts £99m into fossil fuels, but still has greener portfolio than most local authorities

The Lancashire County Pension Fund (LCPF) is ranked 95th out of 97 council pension pots based on the proportion of its cash that is invested in fossil fuels.

According to a response to a Freedom of Information request by environmental groups Friends of the Earth and Platform, the LCPF had 0.4 percent of its investments in coal and 0.8 percent in oil and gas as of March 2020. That equates to £99.7m out of the fund's total £8.2bn investments being in fossil fuel sectors.

The figures show that the county council has a greener pension portfolio by that measure than many local authorities that have made the gesture of declaring a “climate emergency”, which County Hall has not so far done. A motion proposing such a declaration was defeated at a meeting of the full council in 2019.

However, the authority did last year pass a Green Party motion calling on the county to draw up a plan to shift Lancashire away from its reliance on carbon within the next decade.

Shaun Turner, who holds the recently-created portfolio of cabinet member for environment and climate change at Lancashire County Council, says that the authority’s pension fund investments show that “actions speak louder than words”.

“I don't want to stick a flag up saying we have declared a climate emergency, but then not do anything [about it]. I think there's a danger of falling into that trap.

“We want to get to net zero [carbon emissions] at the earliest opportunity - and protecting the environment is one of our main corporate aims. I’m pleased that [the figures show] it's not all talk and we’re actually following through on our commitment,” County Cllr Turner said.

The latest figures presented to Lancashire County Council’s pension fund committee state that 2.66 percent of LCPF investments were in so-called “brown” activities between April and June this year - this is understood to include not only direct investment in fossil fuels, but also in companies that are linked to them.

During the same period, the LCPF placed 3.22 percent of its investments in “green” activities, directly contributing to real-world decarbonisation. That is largely achieved through renewable energy generation, but also other measures supporting lower emissions, such as waste management.

County Cllr Eddie Pope, chair of the committee, says that the direction of travel away from fossil fuel investments is clear - but stressed that it had to be done in a way that does not jeopardise the primary purpose of the LCPF.

“We have a very active responsible investment policy and we take it very seriously. We are looking to reduce [fossil fuel investment] down to zero eventually, but we do it in a controlled and responsible way that doesn’t affect the value of our overall assets.

“We do it when opportunities arise and when it’s in the best interests of the fund. We have got to make sure that our pensioners receive their pensions - that’s our number one priority.

“But at the same time, we realise the responsibility that we’ve got to ensure that the atmosphere is as clean as possible - and we continue to contribute to that,” County Cllr Pope added.

The Friends of the Earth and Platform data shows that local authorities across the UK invested nearly £10 billion in fossil fuels through their pension funds last year.

That works out as £1,450 for each of the 6.8m members of the Local Government Pension Scheme in the UK - and about three percent of the total scheme value.

However, the amount local government pension schemes invest in fossil fuels is declining. Similar research in 2017 revealed £16 billion invested in the coal, oil and gas industries.

The figures have been compiled with less than a fortnight to go before the United Nations COP26 climate conference begins in Glasgow, where world leaders will attempt to thrash out new carbon reduction targets in an attempt to ensure global temperature rises do not exceed 1.5 degrees Celsius.

Robert Noyes, an energy economist at Platform and a co-ordinator of pressure group UK Divest said of the council pension fund statistics that local authorities “have a simple choice”.

“They can pay polluters to wreck the planet, or they can play their part in the global climate effort by ending their fossil fuel investments.

“While their net-zero adverts are appealing, not a single fossil fuel company has implemented measures to comply with the 2015 UN Paris Agreement, while in 2020, on average these companies spent just one percent of their annual capital expenditure on clean energy.

“There is no change coming from continued engagement, there is only delay.

“With support for climate action at an all time high, and the financial benefits of fossil fuel funding increasingly unclear - the choice is as easy as it is simple: divest from fossil fuels, join the $14.5tn coalition of climate leaders in drawing a line, and invest in a future worth retiring into,” Mr. Noyes said.

A spokesperson for the Department of Work and Pensions said: “We are encouraging organisations to commit to net zero in a way that works for them, and to publish a plan for doing so.

“Pressure to comply with government-set mandatory targets would undermine trustees’ duty to invest in the best interests of their members, and would likely force immediate divestment from some stocks - regardless of whether the company is showing meaningful attempts to reach net zero or not.”

In a statement on its website, the Local Authority Pension Fund Forum (LAPFF) said that reducing exposure to climate risks “takes a variety of forms between local authority pension funds”.

“For some LAPFF members, reducing exposure means divesting from fossil fuel-intensive companies most at risk of having stranded assets. Others consider that excluding all energy companies could lead to greater volatility of returns and creates its own risks.

“Although the debate about engagement or divestment is often presented as binary choice, the Forum is increasingly seeing member funds seeking to reduce investment risks by tilting away from specific sectors while also engaging with companies they continue to invest in,” the statement added.