Two Councils at the front line of fracking protests – Greater Manchester and West Sussex – have pension funds investing in the major fracking operators – while decisions on planning applications to frack are pending.
The findings – which have emerged from a special investigation for The Ecologist – reveal a serious conflict of interest as the value of planners’ pensions could be affected by the decisions they are making.
West Sussex County Council Pension Fund (WSCCPF) invests in IGas, Celtique Energie – and Cuadrilla, which made the news headlines in the summer at Balcombe.
Greater Manchester Pension Fund (GMPF) has the same interests in the big three with IGas currently facing protesters at Barton Moss near Salford.
The spreading tentacles
Lawrence Carter, energy campaigner at Greenpeace UK said: “After the business rate bribes promised by the government, it now turns out that councils have their pension pots riding on the outcome of fracking applications. These councils appear to have a worryingly large stake in the success of the UK’s fracking industry.
“Fracking is a highly controversial issue and council authorities owe it to their citizens to ensure that they are far beyond even the slightest suspicion of a conflict of interest. Local councils are institutions trusted by the vast majority of the population – they need to do all they can to retain that trust.”
In Balcombe, Cuadrilla is waiting on planning permission from West Sussex County Council to continue its controversial work from last summer with a series of flow tests to assess the viability of fracking.
WSCCPF invests in the US firm to the tune of £3.8m through its UK partner, Centrica. It has also invested in IGas, which has a licence block covering the West Sussex town of Storrington.
This investment is via IGas shareholder Ballie Gifford, a fund manager for WSCCPF. The firm is the recipient of the largest WSCCPF investment – £187m – an undisclosed proportion of which is invested in IGas.
Celtique Energie is looking to frack in nearby Fernhurst, Billingshurst and Wisborough Green. It too is a potential money-spinner for the Council, although to a lesser extent: WSCCPF has fracking investments through two portfolio funds, Partners Group and Pantheon Global Secondary Fund (under £5,000 in each).
‘No conflict of interest’, insists West Sussex
A West Sussex County Council spokesman told The Ecologist: “There is not a conflict of interest. Bailie Gifford has a discretionary mandate and make investments to fulfil the obligations on the pension fund. Whether or not we hold any stocks in our pension fund will not alter any planning decision that we do or do not take.”
The West Sussex Pension Fund, worth some £2.45 billion, is one of the larger local authority pension funds in England and Wales.
As well as the County Council it takes in the University of Chichester, Chichester College, Central Sussex College, several district councils in the area and more than a dozen town and parish councils – plus local housing associations and public and voluntary sector organisations.
The fund invests in a number of other controversial companies in ams and tobacco. It holds shares worth £8.5m in British American Tobacco and £4.5m in BAE Systems.
Manchester Councils – heavily committed
Further north, Salford and Trafford Councils, which have granted permission for IGas to drill at Barton Moss and Davyhulme, have investments through the GMPF, with £108m in the Henderson Group which through a subsidiary, is a major shareholder in IGas.
GMPF also has holdings totalling £73m in Cuadrilla via partner, Centrica and £10m in Pantheon Global Security Fund IV and £1.9m in Partners Group, both portfolio funds which invest in Celtique Energie.
While the permit IGas holds in Barton Moss is for coal bed methane exploration, the company has stated that it is also considering shale gas extraction by fracking in the future.
No conflict of interest that we’re aware of …
A Salford Council spokesperson told The Ecologist: “Planning permission for coal-bed methane exploration drilling was given in 2010, when the city’s Planning Panel considered all the issues carefully, heard a great deal of evidence, and granted permission for the exploration to take place.
“Councillors who took the decision to grant planning permission to I Gas in 2010 for coal-bed methane exploration were not made aware of GMPF’s investments in Henderson Global Investors. There is no conflict of interest that we’re aware of.
“The members of Planning Panel have no role in deciding where GMPF invests its funds and had no role in deciding that GMPF should invest its funds in Henderson Global Investors.
“Should the company or anyone else wish in the future to engage in anything further than they have been given permission for, they would have to seek separate planning permission from the Council. They would also require permits from both the Health and Safety Executive and the Environment Agency, which are the regulatory authorities for these issues.”
The Ecologist has looked into the possible conflict of interest should councillors work both in planning and pension fund management. On its website WSCC Pensions Panel states that it
“wishes to be an active shareholder and exercise its voting rights to promote and support good corporate governance principles, which in turn will feed through into good performance.
“The Pensions Panel has directed the fund managers, in acting in the best financial interests of the scheme, to consider, amongst other factors, the effects of social, environmental and ethical issues of the performance of a company when considering the acquisition, retention or realisation of investments for the scheme.”
While there is no direct crossover between planning and pensions, in West Sussex, Conservative Councillor Steve Waight is on both the Pensions Panel, and the Performance and Finance Select Committee.
Two others – Conservative Cllr Liz Kitchen and Lib Dem Robin Rogers – sit on the same Finance Committee as well as on the Planning Committee.
Trafford Council’s Conservative Cllr Alan Mitchell is on the GMPF Pension Panel and at the same time is on the Executive Committee in charge of Highways and Environment. The Executive is responsible for all key decisions and the strategic management of services.
In nearby Salford, Labour Cllr Bernard Pennington is also on the GMPF Pension Panel and at the same a member of the Finance and Budget Scrutiny Committee.
Local MPs: ‘no comment’
Barbara Keeley, MP for Worsley and Eccles South (which covers Barton Moss), said she could not comment on the WSCCPF as it was not in her remit. When questioned about the wisdom of investment in extreme extraction over and above renewables she made no comment.
The Ecologist also approached Andrew Tyrie MP for Chichester in West Sussex who also did not comment.
This investigation follows a broader picture of local council investment in tobacco and arms companies at a time when NHS resources are stretched and Middle Eastern military repression continues apace.
‘We will not be bought off!’
Meanwhile closer to home other local councillors have rejected government plans to allow councils to keep 100% of business rates from fracking operations, rather than 50% as before.
In Hampshire, the Conservative leader of the county council, Roy Perry told the Portsmouth News that “the Council will not be ‘bought off’ by David Cameron’s offer of extra revenue if it approves applications for fracking.”
On a broader scale some pension funds are already pulling money out of fossil fuels, fearful of owning ‘stranded carbon’ assets. Nearly $2bn has been pulled out of fossil fuel shares with 17 of the world’s largest funds saying that they would reinvest their money in clean energy.
The Green Light Campaign has been set up specifically to encourage pension funds to pull out of the fossil fuel business altogether.
Lancashire – investing in renewables
This comes in the light of a number of leading scientists including Sir David King, the Foreign Office Special Representative on Climate Change, warning that fracking would have “enormous environmental consequences”.
In a positive example of what can be done, just down the road from Barton Moss, Lancashire County Pension fund has recently invested £12m in the world’s largest community-owned solar power station, Westmill Windfarm Cooperative in Oxfordshire.
Jan Goodey, Will Cottrell and Ed Jones are freelance investigative reporters and researchers.