Lothian Pension Fund has a hidden stake in a firm which runs coal power plants and controls part of a major pipeline transporting Russian gas to Europe.
Nearly £17m was invested by Lothian Pension Fund (LPF) into another fund – managed by Australian financial giant Macquarie – which bought part of Czech firm, EP Infrastructure (EPIF).
EPIF in turn owns nearly half of Eustream, which operates gas pipelines in Slovakia, running from the country’s border with Ukraine in the east, to Austria in the west.
Eustream is part of the central corridor which moves Russian gas into Europe and the majority of its revenues come from payments from its main shipping partner, Russia’s state-owned energy company, Gazprom.
Last year Edinburgh councillors passed a motion calling on LPF– which manages pensions for council workers like teachers and carers in the capital and the Lothians – to end its investment in fossil fuels.
But the new revelations have prompted concerns that the true extent of its contribution to the climate crisis could be bigger than first thought. The EPIF investment was only discovered after analysis by journalists and data scientists from the non-profit Anti-Corruption Data Collective, and is not listed in any public information about LPF’s holdings.
One MSP said the findings underline “the need for Edinburgh and other councils to scrutinise and examine all their investments”. They added that if the city’s “divestment pledge and commitments to support our Ukrainian allies are to mean anything” then its stake in the investment fund should be sold.
The main shareholder in EPIF is the Czech billionaire, Daniel Křetínský, who also owns stakes in West Ham football club, the Royal Mail and French newspaper, Le Monde. A Czech campaigner told The Ferret that any investment into Kretinky’s business “empire” could cause “a lot of problems in the decarbonisation of Europe”.
A spokesperson for EPIF said Eustream plays a “critical role” in providing security of gas supply by “connecting EU countries and Ukraine in all directions”. They said that while EPIF’s coal plants were currently “highly efficient”, the company has “clear plans” to move away from coal in future and reach net-zero climate emissions by 2050.
LPF and Macquarie declined to comment.
Edinburgh was one of seven UK councils that invested pension funds in a private equity fund managed by Macquarie, called Macquarie European Infrastructure Fund V (MEIF V).
The other councils were all in England. In total, £103m worth of UK council pensions were invested in the Macquarie fund before it closed in 2016.
Funds like MEIF V invest money raised from other investors – such as public pension funds – in exchange for fees and shares of profits.
Once an investor, such as LPF, puts money into one of these funds, it no longer has control over how that money is used. The investor receives a portion of the profits generated by the fund.
Infrastructure companies are a popular investment for these funds because they are low-risk and offer long-term returns on investment. The purchase of 31 per cent of EPIF was MEIF V’s first deal in 2016.
EPIF owns 49 per cent of Eustream, which mainly ships Russian gas to customers in Austria and Italy.
Investors in pipelines which transport Russian gas have been criticised since the country’s invasion of Ukraine for allegedly “indirectly funding Putin’s aggression”.
A Canadian campaign group said last year that while pension funds treat infrastructure investments like Eustream as “low-risk cash machines” they have “real-world implications for business models that help prop up authoritarian regimes and lock in the use of fossil fuels”.
This underlines the need for Edinburgh and other councils to scrutinise and examine all of their investments to ensure that they are not directly or indirectly supporting or profiting from fossil fuels.
Ross Greer MSP, Scottish Greens
EPIF is part of Daniel Kretinsky’s wider EPH Group, which also includes the firm, EP Power Europe (EPPE).
EPPE has bought a lot of carbon intensive assets — particularly coal power stations — at low prices from some of Europe’s energy giants in recent years. As a result, the wider EPH group is now responsible for the third most climate pollution of any energy company on the continent.
Much of this pollution comes from EPH’s ownership of power stations fired by lignite – the dirtiest form of coal.
The most controversial coal projects owned by the wider EPH group are under the EPPE umbrella, but EPIF does operate two coal-fired power plants of its own in the Czech Republic.
Radek Kubala, a campaigner at the Czech environmental group, Re-Set, claimed that although Macquarie had invested LPF money in EPIF, not EPPE, any funding for the wider EPH Group contributes to the “expansion of fossil fuel infrastructure in Europe and also helping them slow down” the phase-out of coal.
“Any investment into part of Daniel Kretinsky’s empire means a lot of problems in the decarbonisation of Europe,” Kubala told The Ferret.
“Part of the EPH strategy is that they own just a few coal and gas assets in various countries so except in Germany they are not the biggest actor from a national perspective. This strategy helps them stay hidden from public pressure even though they are really big in a European context.”
Susan Hamilton, a campaigner for Divest Lothian, branded the investments in EPIF “deeply disturbing”.
“Edinburgh and East Lothian councils voted to stop investing in fossil fuels last year, but we’ve yet to see the Lothian Pension Fund listen to them and take action on this,” Hamilton said. “As more dangerous investments like this are being discovered through careful analysis, it looks like it could be investing even more than we currently know about.”
Edinburgh and East Lothian councils voted to stop investing in fossil fuels last year, but we’ve yet to see the Lothian Pension Fund listen to them and take action on this.
Susan Hamilton, Divest Lothian
The Scottish Greens MSP, Ross Greer, told The Ferret there is a “responsibility on every level of government or anyone receiving public money to avoid all complicity in supporting the Russian gas industry or the Kremlin war machine”.
Greer added: “If Edinburgh City Council’s divestment pledge and commitments to support our Ukrainian allies are to mean anything then I hope this stake has already been sold. If not, that must happen immediately.
“This underlines the need for Edinburgh and other councils to scrutinise and examine all of their investments to ensure that they are not directly or indirectly supporting or profiting from fossil fuels.”
Greer’s Green colleague and Edinburgh councillor, Ben Parker, said he would write to “the convener of the pensions committee and the CEO of Lothian Pension Fund to demand that they review” the investment in the Macquarie fund.
A spokesperson for EPH – who also responded on behalf of EPIF, EPPE and Eustream – said: “Eustream transports gas for customers mainly in Italy and Austria. This gas comes from the Ukrainian transit system only.
“In the past, Eustream has made Ukraine’s gas supply operational, helping to ensure security of supply. Eustream plays a critical role in security of supply connecting EU countries and Ukraine in all directions.
“EPIF does not operate conventional power plants, but highly efficient cogeneration plants that supply heat and hot water to large agglomerations. It has clear plans to move to a coal-free solution.”
The spokesperson added that EPH as a whole is investing around £8.5bn in renewable energy projects and expects to be “free of almost all coal assets by the end of 2025”.
Both LPF and Macquarie declined to comment despite a request from The Ferret.
LPF’s website says it recognises “climate change as a critical factor affecting future investment returns”. It adds it is “unwilling to provide any new financing to companies which aren’t aligned with the goals of the Paris Agreement” to limit global temperature rises to no more than 1.5 degrees.
Macquarie claims it has for “two decades” worked with the “public and private sector to support the energy transition and advance solutions to climate challenges”. It says it wants to play a “leading role in the global transition to net zero emissions by 2050”.
Main image: Smederevac/iStock
