While many of the UK’s LGPS funds have pledged to divest from fossil fuels, they continue to fund oil and gas through their private market holdings, an investigation has revealed
LGPS funds with ambitious net zero targets are still playing a key role in funding the large-scale buildout of LNG terminals across the US Gulf Coast, according to an investigation by Josephine Moulds and Simon Lock conducted on behalf of the Bureau of Investigative Journalism.
An in-depth analysis of the private market allocations of the UK’s 86 LGPS funds, which collectively manage more than £400bn in assets, shows they still hold significant exposure to the fossil fuel industry through private market investments, despite pledges to divest.
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The findings come as LGPS funds face growing pressure from policymakers to increase investment in private markets, with some of the largest flagship infrastructure funds accounting for the bulk of LNG exposure.
For example, Stonepeak III and Stonepeak IV help fund the Calcasieu Pass and Woodside Louisiana LNG facilities. These projects are backed by more than £360m in investments from West Yorkshire, South Yorkshire, Worcestershire, Bedfordshire, Cumbria, Durham, East Riding, North Yorkshire, Surrey, Teesside, Tyne & Wear, and Warwickshire, the research shows.
Meanwhile, Greater Manchester, Waltham Forest, West Midlands, Cheshire, Leicestershire, Shropshire, Staffordshire, and Nottinghamshire hold exposure to Rio Grande LNG via the Global Infrastructure Partners V fund.
Overall, 60 of the nation’s LGPS funds have some degree of exposure to LNG infrastructure through their private market holdings, the research reveals.
While not all of the funds in question pursue a fossil fuel divestment policy, such commitments could prove lucrative in the short term while exposing funds to significant investment and reputational risks.
LNG has a larger carbon footprint than coal, and the eight terminals listed in the survey would generate more CO2 emissions each year than the entire UK, according to Sierra Club.
Moreover, despite current LNG shortages sparked by the war in Iran, the world faces a long-term supply glut due to the rapid expansion of production in the US and Qatar, the IEA has warned.
Much of the future offtake for these terminals will depend on demand from emerging markets, many of which are instead scaling up renewable energy production. This could leave investors in US LNG infrastructure exposed to stranded assets, researchers have warned.
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