Thirty-three Local Government Pension Scheme funds retain investments worth more than £2bn in arms manufacturers and in companies accused of supporting illegal Israeli settlements, as some of these schemes opt for engagement instead of divestment.
A searchable database compiled by the Palestine Solidarity Campaign lists direct investments made by 33 of the 89 LGPS funds in companies on the UN Human Rights Council’s blacklist, including arms manufacturers condemned by the Human Rights Watch and Amnesty International.
Additionally, five LGPS funds retain investments in Bank Hapoalim, found guilty of involvement in tax avoidance and bribery scandals, as reported by Pensions Expert earlier this month.
Hackney Pension Fund and the East Sussex Pension Fund have investments in Israeli arms manufacturer Elbit Systems, accused of complicity in war crimes, after a Human Rights Watch report linked its Hermes drones to the deaths of 29 civilians in the Gaza strip.
It is certainly not for me or, thanks to the Supreme Court, for the government to tell them what that decision should be
Jeff Houston, Local Government Pension Scheme Advisory Board
Ben Jamal, director of Palestine Solidarity Campaign, told Pensions Expert: “Our research has revealed the shocking complicity of LGPS funds in Israel’s war crimes. It is deeply appalling that this money is being used to fund violations of international law.
“Administering authorities of local authority pension funds should seek to remedy this situation as a matter of extreme urgency.”
Several of the funds listed in the database hold investments worth millions of pounds in arms manufacturers, including BAE Systems, Raytheon, Lockheed and Babcock International.
The Environment Agency, Greater Manchester and Derbyshire pension funds hold investments in security services company G4S, which rights groups accuse of being complicit in the detention of political prisoners in Israel.
Investment policy favours engagement
Each of the funds mentioned in this report has an ethical investment policy, and most make clear that, where investments are held in companies embroiled in controversy, the policy of the fund is engagement rather than exclusion.
For example, East Sussex’s responsible investing policy stated that the pension fund “has never sought to implement a policy that explicitly excludes certain types of investments, companies or sectors except where they are barred by UK law.”
It continued: “The fund believes that its influence as a shareholder is better deployed by engaging with companies, in order to influence behaviour and enhance shareholder value. The fund believes that this influence would be lost through a divestment or screening approach.”
Jeff Houston, secretary of the LGPS Advisory Board, argued that local authorities “are required to follow regulation and guidance as set out by the secretary of state”.
Local government pension schemes invest in bank guilty of tax evasion
A number of local government pension schemes have come under fire over their investments in a troubled Israeli bank, according to research seen by Pensions Expert.
The recent Supreme Court decision, which overturned the government’s ban on LGPS divestment and boycott strategies, established that “such decisions rightly fall to local authorities themselves”, Mr Houston said.
He added that authorities “continue to have the right, should they wish, to disinvest or boycott on non-financial grounds provided they meet the requirements of the guidance. It is certainly not for me or, thanks to the Supreme Court, [for] the government to tell them what that decision should be”.
East Sussex, Hackney, Environment Agency, Greater Manchester and Derbyshire local authorities have been approached for comment.
