Pension funds run by ten Scottish local authorities invest more than £400 million in 23 fracking companies, according to a new report.

Glasgow, Edinburgh, Aberdeen, Dundee, Falkirk and other councils put their pension money in multinational shale gas firms blamed for causing climate pollution.

Campaigners say the fracking industry is “completely irresponsible” and are calling for money to be invested in clean energy instead. But councils say they have a duty to pensioners to invest where they can make the most money.

A new report by Friends of the Earth Scotland discloses council pension investments in Shell, BP, Exxon, Chevron, Occidental and many other companies it says are involved in fracturing underground rocks to extract shale gas.

The biggest investor is the Strathclyde Pension Fund, administered by Glasgow City Council, which has put £142 million into 21 companies. Two of them are said to have breached environmental laws in the US.

Over the last two years US authorities have fined Range Resources $13 million for pollution breaches in Pennsylvania. Cabot Oil and Gas, based in Houston Texas, was reported for 494 environmental violations in Pennsylvania between 2009 and 2013.

Dundee’s pension fund invests £59m in fracking firms, Aberdeen’s £51m, Edinburgh’s £46m and Falkirk’s £40m (see tables below). The only council-run pension scheme that doesn’t have money in fracking is Shetland’s, says the report.

“Opening up new frontiers of fossil fuels like fracked gas whether here or in the US is completely irresponsible in the context of the global climate crisis,” said Friends of the Earth Scotland campaigner, Flick Monk.

She pointed out that more than 40,000 people have urged the Scottish Government to permanently ban fracking because of its risks. A public consultation ended on 31 May, and ministers have promised to make a decision before the end of the year.

“If fracking is too dirty and dangerous for us here in Scotland we shouldn’t be profiting from it taking place in other countries. Our local government pension funds should be investing for the long-term, not undermining our future by investing in the industries driving global climate change,” Monk said.

“The pressure will be on councillors on pension committees whose parties oppose fracking in Scotland to put in place an investment approach that supports a healthy future for us all, instead of making a quick buck from dirty industries like fracking.”

The trade union Unison argued that councils should be investing in clean energy solutions, not fossil fuels. “Using pension funds to invest in fracking is wrong on environmental and safety grounds,” said the union’s Scottish organiser, Dave Watson.

“It is also a risky investment given doubts about the financial viability of fracking.” Unison represents many local government pension fund members in Scotland.

Pension funds, however, argued that they had limited flexibility because of the “fiduciary duty” they had under law to protect the value of pensions. “This restricts disinvesting from companies for purely non-financial reasons,” said Pamela Bruce, spokesperson the Lothian Pension Fund administered by Edinburgh City Council.

Withdrawing funds may not the best way to influence corporate behaviour, she argued. “By engaging with companies, the fund is able encourage responsible corporate behaviour, which is potentially more beneficial to the environment and society than divestment.”

Strathclyde Pension Fund stressed it was “a strong supporter” of the transition to a low carbon economy. “However, the fund does not agree that an exclusive focus on fossil fuels is a reliable measure of any investor’s exposure,” said a spokesman.

“Simple divestment is unlikely to address climate change, as all evidence suggests it simply gives greater control to investors with absolutely no commitment or interest in climate change or environmental protection.”

Falkirk Council said it had recently changed its policy “to place greater emphasis on climate change risk”. Although the council had “some indirect exposure to fracking”, its fund managers would “engage robustly with investee companies in order to ensure that environmental risks are being properly recognised and managed.”

Dundee City Council said that its investment managers had to have signed up to United Nations responsible investment principles. Aberdeen City Council did not respond to a request to comment.

The Convention of Scottish Local Authorities said that pension funds made investment decisions in line with their legal obligations. “Accountability lies entirely with the pension funds and their respective pension committees with regard to the decisions made,” said a convention spokesperson.

The UK fracking industry argued that investments in US shale had helped reduce climate pollution. “Oil and gas form the basis of our everyday life,” said Ken Cronin, chief executive of UK Onshore Oil and Gas.

“The materials we now rely upon to produce our wind turbines, solar panels and low weight fuel efficient products for cars and planes come from oil and gas. In Scotland, nearly 2m homes and 22,000 businesses are connected to gas.”

Council investments in fracking companies

Council administering pension schemeInvested in fracking firms
Dumfries and Galloway£21m
CompanyInvestments by Scottish councils
Exxon Mobil£44m
BHP Billiton£19.5m
Range Resources£0.4m
Newfield Exploration£0.3m
source: Friends of the Earth Scotland

Photo thanks to EcoFlight.

A version of this article was published in the Sunday Herald on 18 June 2017.

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