A £59m investment in ‘outdated and dangerous’ fossil fuels for council pension funds has been slammed by the Lambeth Green Party.
The Greens have called on the council to divest its £59m of pension fund holdings in fossil fuel companies, which works out to £190 for every single resident in the borough.
With around 100 deaths from air pollution annually in Lambeth – and nearly 10,000 across the capital – a report published by Fossil Free UK on Thursday highlighted the extent of local authority investment in companies such as BP and Shell.
Lambeth Green Party Councillor, Scott Ainslie, said: “The burning of fossil fuels is outdated and dangerous.
“Divestment of these stocks would show that Lambeth Council takes the health of its residents seriously and is committed to supporting the global fight against climate change.”
The report, Local government pensions, fossil fuels & the transition to a new economy, produced by Fossil Free UK, has collated the holdings of regional pension funds in the local government pension scheme (LGPS) and found that more than £14billion of public sector pension funds is currently invested in fossil fuels.
Merton Council’s pension fund has the highest proportion of investment in fossil fuels of any local authority in the UK, according to the report.
Of Merton Council’s £480million total pension pot, £52m is invested in fossil fuel-related companies, which equates to 11% of its total investments.
A Merton Council spokesperson said: “We have to act within the law to ensure our pensioners are looked after, and the law demands any pension fund’s investment managers seek to maximise returns for staff.
“However, Merton Council itself has a proud track record of investing in sustainability. Our ‘Merton Rule’ requiring new developments to generate renewable energy on site has been copied across the country and is now part of national planning guidance, and in the past five years alone we have invested over £4.6m in energy efficiency.”
Across south west London LGPS funds have nearly £400m in fossil fuel investments, with Kensington and Chelsea, Hammersmith and Fulham, Richmond-upon-Thames, Wandsworth, Sutton, Lambeth and Croydon all having at least 5% of their pension fund invested in fossil fuels.
“When governments finally take climate change seriously shares in oil, gas and coal will become worthless.”
The actual figures could be even higher, as the report data does not include equity in companies outside of the top 200 fossil fuel companies or indirect investments, such as via financing from major banks.
Aside from the moral considerations of such large-scale investment in what the report describes as ‘the most destructive industry on the planet’, the report points out the inherent financial risk in gambling on companies that need to leave as much as 80% of their resources unused in order to meet climate change targets.
It states: “When local governments allow pensions to be exposed to fossil fuels, they’re relying on stranded assets for the safe retirement of their workers.
“When governments finally take climate change seriously shares in oil, gas and coal will become worthless.”
Divest Lambeth, who are pressuring Lambeth Council to divest their £59million in fossil fuel companies, provided the example of CalPERS and CalSTRS, two of the biggest public pension funds in the United States, which lost more than $5billion in fossil fuel holdings in the last fiscal year alone.
Most significantly, these investments move public capital away from local authorities to be invested overseas, meaning that the only benefit to those paying in to the fund is a return on capital, but at considerable risk.
The report states that, by divesting from fossil fuel holdings, local governments would be free to invest in renewable energy, social housing and public transport which would provide a more stable financial return, as well as boosting local economies and reducing inequality.
It estimates that, if the entire £14billion invested in fossil fuels by all LGPS funds was divested, more than 200,000 energy efficient social rent homes could be built, or more than 2 million solar panels could be installed across residential homes, schools and municipal buildings.
Tooting MP and Labour’s London mayoral candidate Sadiq Khan has pledged to divest all fossil fuel holdings from the £4.8bn London Pensions Fund Authority (LPFA), which is not covered by the report, if he is elected next May.
