An environmental campaign group has called on Fife Council to divest from fossil fuel companies that are costing its future pensioners hundreds of thousands of pounds every year.

Friends of the Earth Scotland (FoES) says Fife is among 20 local authorities in Scotland that has declared a climate emergency but continues to invest in what it calls “planet-wrecking” firms.

A report written by the environment body and investment monitor Platform warns that authorities are exposing their pension funds to unnecessary financial risk by continuing to support fossil fuel bodies.

The council declared a climate emergency in September 2019, committing itself to being carbon neutral by 2045. But it continues to rely on fossil fuels for almost three per cent of its total pension fund value.

Ric Lander, divestment campaigner with FoES, says councils have an opportunity to make a statement by divesting ahead of the United Nations Climate Change Conference – better known as COP26 – in Glasgow this November.

“Local councillors have the opportunity to show leadership on climate action by telling fund managers to divest from fossil fuels,” he said.

“Scottish council pensions are directly invested in the continued search for new fossil fuels through their ownership of companies like Shell and BP.

“This drive is undermining efforts to curb the climate emergency here in Scotland and doing untold damage to vulnerable communities around the world.”

Figures released to FoES under freedom of information laws show that fossil fuel investments make up £70.1 million of the Fife Pension Fund, or 2.9 per cent of its total value – but that this has dropped by £2.3 million since 2017, wiping money from workers’ hard-earned retirement pots.

This decline is expected to continue as the world pursues cleaner sources of energy and as other pension funds divest from fossil fuels. The University of St Andrews divested its pension scheme from oil and gas companies completely in 2017.

Fife Council is responsible for the Fife Pension Fund but the scheme itself supports retirees from dozens of local public sector employers, including Fife College, Visit Scotland, the emergency services, Citizens Advice and Rights Fife and numerous local trusts.

The council employs Hermes Equity Ownership Services to lobby firms it has invested in to make more environmentally friendly choices.

However, Mr Lander says councils need to go further and divest completely from companies that have a negative impact on the environment.

“Local authorities have the power and duty to ensure local workers have a pension for their retirement, but also a future worth retiring into,” he concluded.

FoES has the backing of public sector trade union UNISON, which says councils have a responsibility to their and other workers to invest ethically in order to protect retirement funds.

However, the UK’s representative body for oil and gas firms says divesting from fossil fuels could have the opposite effect of what is intended – by hampering firms’ ability to transition to renewables.

Mike Tholen, sustainability director of Oil and Gas UK, says the industry supports 270,000 jobs and generous tax contributions, both of which could be reduced.

He said: “The UK oil and gas industry is playing a key role in the energy transition, reducing emissions from offshore production and helping the UK to lead on carbon reduction technologies, including the switch to hydrogen and long-term storage of CO2.

“A nationwide divestment from oil and gas companies could have the directly opposite effect of what it sets out to achieve, blocking low carbon innovation and disrupting the development of skills needed to accelerate the transition to a more diverse, lower carbon energy mix.

“Only by working together across sectors can we realise the full potential of the UK’s commitment to delivering net zero.”

Fife Council’s head of finance Elaine Muir said the authority considered environmental, social and corporate governance factors (known collectively as ESG) when choosing where to invest.

She said: “Our Superannuation and Pensions committee works to a set of investment principles. These are in place to ensure investment managers consider the social, environmental and ethical policies of companies in which they invest.

“We are committed to a balance between maximising investment income and ethical investment which is why we employ Federated Hermes. Their team help monitor our investments in companies and intervene where necessary with the aim of improving our long-term corporate performance.

“We’ll continue to closely monitor our investments, making sure members of the pension scheme receive the best possible long-term return while taking full account of our wider ethical responsibilities.”

The council did not respond to a direct question as to whether it would consider divesting from fossil fuel funds.