'Green' Lothian Pension Fund under fire for 40% rise in fossil fuel investment

And there is concern that there is "inaction inertia" with no move to divest from fossil fuels.

The Lothian Pension Fund, overseen by the City of Edinburgh Council, is among a record number of signatories to a joint global investor statement calling on governments to urgently ramp up their efforts to address the climate crisis.

The Investor Agenda’s 2021 Global Investor Statement to Governments on the Climate Crisis contains the collective views of 587 major investors from around the world, representing around 40 per cent of global assets under management.

And in June a new “statement of responsible investment principles” from the pension fund says that “climate change is undoubtedly one of the defining issues of our time” and that its commitments going forward include ceasing “primary investment in companies that aren’t aligned with the goals of the Paris agreement”.

Almost 200 countries ratified the Paris climate accord at COP21 six years ago agreeing to pursue efforts to limit the planet’s temperature increase to 1.5C above pre-industrial levels.

But research has found the pension fund’s fossil fuel investments have risen by £64 million since 2020 and now stands at £229m.

It is thought that the rise in value has been the result of a bounce back of shares in fossil fuel companies with the easing of lockdown.

In June, the International Energy Agency (IEA) said that the world’s demand for oil will rebound to pre-pandemic levels by the end of 2022, as recovering economies require oil-producing countries to pump more fossil fuels.

Shell is one of the owners of the controversial Cambo oil field, situated off the coast of Shetland, which campaigners are currently fighting to stop going ahead.

The study carried out by Friends of the Earth Scotland checked the fund for investments against the Carbon Underground 200 - a list of the largest owners of carbon reserves.

Climate activists from campaign group Divest Lothian staged a protest outside Edinburgh City Chambers on Monday to demand the pension fund, , removes this money from investments which they say is fuelling the climate crisis.

The Lothian Pension Fund is the second largest local government pension scheme in Scotland and administers the pension funds of over 84,000 members from The City of Edinburgh Council and three other local authorities in the Lothians. It also manages the pensions of 90 employers, including Scottish Water, Edinburgh Napier University, Lothian Buses and Heriot Watt University.

Iain Struthers from Divest Lothian said: "It is deeply inconsistent and morally unjustifiable that Edinburgh City Council is positioning itself to be a zero-carbon city by 2030, but with no mention of divesting its interests in fossil fuels.

"Stakeholder engagement will never change the core business model of polluting companies. Divestment is an essential step to accelerate the just transition to a sustainable future for all."

Sally Clark, divestment campaigner from Friends of the Earth Scotland said: “The Lothian Pension Fund is directly invested in the continued search for fossil fuels through its £229 million investment in companies like BP, Shell and BHP. This is undermining the City of Edinburgh’s commitment to tackle the climate crisis.

“As Scotland prepares to host the COP26 in less than a month, Scottish councils have a vital opportunity to show climate leadership by ending their pension fund investments in companies that are destroying the planet. Similar funds such as the Cardiff, Lambeth and Waltham Forest pension funds have already committed to go fossil fuel free and it is now time for the Lothian Pension Fund to join them."

Campaigners highlighted that since The City of Edinburgh Council pledged to become a net-zero carbon city by 2030 and Midlothian, West Lothian and East Lothian Councils declared 'climate emergency' in 2019, the Lothian Pension Fund has "continued to profit" from some of the coal, oil and gas companies which are most responsible for the climate crisis.

It comes as activists Extinction Rebellion plan to hold a protest on the streets of Edinburgh this month against a backdrop of the COP 26 climate conference in Glasgow.

The 26th UN climate conference will see world leaders descend on Scotland to discuss the way forward in tackling environmental issues.

But, Extinction Rebellion describe the conference as “systematically corrupted by vested interests” and have vowed to do their level best to disrupt proceedings.

The activist group have sent the City of Edinburgh Council notification of their plans to hold a protest parade through the streets of the capital on October 31.

The City of Edinburgh Council was approached for comment.

A Lothian Penson Fund spokesman said it should not be surprising that the value of its energy holdings is higher than in 2020 as stock prices have risen by more than 65% over the last 12 months.

"The Fund’s position is... it favours a policy of engagement with companies as opposed to divestment of shares," said the spokesman.

" Divestment campaigners think that selling shares changes carbon emissions and that companies disappear. That is simply not the case. Reduced emissions are achieved by changing company strategy, government policy and individual choices. The fund is concentrating on real world decarbonisation outcomes, not virtue signalling."

The spokesman also pointed out that the fund owns a higher percentage of assets in renewables than it does in traditional fossil fuel energy companies.

“What we know about the transition is that it will be long and complex. Fossil fuels will, in fact, be required in significant quantity to effect the transition that we all want," the fund said.

Fund chief exectuive David Vallery said: “We support the transition to a carbon free economy and at LPF we are confident we are doing our part. We use our investments and engage with companies seeking positive change and invest in wind, solar and hydro to provide renewable alternatives.”