LAPFF issues guidance on fossil fuel assets after slew of freedom of information requests on holdings

The UK’s Local Authority Pension Fund Forum (LAPFF), which represents 64 funds with combined assets of over £115bn, has published a guidance paper explaining its position on investment in fossil fuels, after noting that campaigners were increasingly using the UK’s Freedom of Information (FOI) Act to publish the amount of assets the funds hold in carbon intensive companies, and then push for divestment. Last month, RI reported that a campaign by Fossil Free UK, which is linked to 350.org, the US environmental group, published data showing that local government pension funds with £230bn in assets invested £14bn of that total – or 6% – into fossil fuel companies.
Fossil Free UK told RI that it had put in FOI requests at 101 UK local authorities to source the information, and said it used publicly available data where there was no response. Public bodies such as local authority pension schemes are obliged to respond to FOI requests unless there are serious commercial reasons not to.
UK pension funds have told RI that they are increasingly being targeted by FOI requests on fossil fuel holdings. These are usually handed on to the fund managers that run the assets, some of whom are understood to be taking legal advice on the information they should hand over.
In February this year, RI reported that UK law firm, Client Earth, was preparing a legal test case by members of a UK pension alleging that the fund is breaching its fiduciary duty by not considering the potential impacts of climate change on its investments.
In the recently released Fossil Free UK data, the top 5 UK pension fund investors in fossil fuel companies were all LAPFF members.Top of the list was the £13bn (€17.8bn) Greater Manchester Pension Fund, which has fossil fuel investments comprising 10% of its portfolio (£1.3bn), according to the figures. The fund is chaired by Kieran Quinn, who also chairs LAPFF. Second biggest was Strathclyde pension fund (£752m) and third was West Yorkshire pension fund (£671m), both LAPFF members.
LAPFF said its members had received FOI requests from “a number of NGOs coordinating many of these requests including Fossil Free UK and its partner organisations.”
It noted that the campaigners were using the data for divestment calls. There are more than 30 such campaigns taking place in the UK targeting local authority pension funds. In the response paper, LAPFF said the issue of stranded fossil fuel assets was a collective investment risk for all asset owners and is an engagement and policy priority. It said it did not support divestment from fossil fuel companies, saying such strategies reduced its “ability to influence both the short and long- term direction of individual companies and the national and international energy sector”.
It said its engagement strategy was to ask companies to identify and tackle carbon risks in their business models and look at the value at risk of high cost projects and return capital to investors where appropriate. It said companies should align their business models with a 2°C scenario for “an orderly carbon transition”. LAPFF was a key mover in the ‘Aiming for A’ shareholder resolutions at Shell and BP and has engaged with the likes of Rio Tinto and others on climate change. It has supported greenhouse gas emissions disclosure resolutions at ExxonMobil and Chevron.
This week, LAPFF called for mandatory carbon reporting for companies listed on the Hong Kong Stock Exchange. While welcoming a move by the exchange towards a ‘comply or explain’ approach for ESG reporting, it said it should take a further step on obligatory carbon data.

Link to the LAPFF fossil fuel investment guidance