SCOTTISH councils are putting at risk their pension funds and face a possible legal challenge by failing to ditch investments in companies most responsible for climate change, according to a new report.

While £1.7 billion is being invested in fossil fuel firms, just £234 million is being invested in renewable energy and social housing across all Scotland's council pension funds, according to a study by think tank Common Weal, Unison Scotland and Friends of the Earth Scotland.

The study by think tank Common Weal, Unison Scotland and Friends of the Earth Scotland says the amount invested in fossil fuel companies has not changed despite governments around the world signing up to tackle climate change in Paris in December, 2015.

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And the report looking at investments in 2016/17 says that while no council have yet made any commitment to divest from fossil fuel companies while eight universities and churches in Scotland have.

Nearly five percent of the £35.4 billion Scottish Local Government Pension Scheme is invested in fossil fuels with £543 million directly invested in oil and gas and £113 million in coal. The majority of investments were made in "intermediaries".

The report says that just six of the 11 Scottish councils who run pension funds have ever discussed climate change at board level.

The Dumfries and Galloway fund tops the list of Scots council fossil fuel investors with 10.2 percent of its £692 million scheme, followed by Shetland with 8.2 percent and Falkirk with 6.5 percent.

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The Strathclyde Pension Fund, the biggest council run scheme in Scotland, has the most invested in fossil fuel companies. Their £889 million stake makes up 5.5 percent of its portfolio.

By contrast, the six-billion-pound Lothian scheme, the second biggest council-run pension fund in Scotland, has just 1.7 percent (£104 million) in fossil fuel companies, the lowest of the 11.

The analysis says that councils invest in companies such as BP, who are fracking and drilling for oil in the Arctic "as well as having a history of campaigning against subsidies for renewable energy", and BHP Billiton, the 12th largest extractor of coal in the world, currently mining in the centre of the Borneo rainforest and facing prosecution over Brazil’s worst ever environmental disaster.

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Royal Dutch Shell was the most favoured fossil fuel company investment, with nearly £130 million worth of equity held across the local government pension fund investors. The study says that by continuing to invest in the companies most responsible for global climate change councils are "failing to protect their pension fund members’ best interests and risk losing huge sums as government action to curb climate emissions sees fossil fuel companies’ value plummet".

With the risks widely know by fund managers, failure to act could lead them open to legal challenge by failing in their fiduciary duty to act in the best interests of those who pay into and rely upon the pension fund, the report says.

It warns: "Council pension funds that fail to act on climate change will risk heavy losses and face the possibility of a legal challenge. If investors continue with business as usual the risk of financial and environmental catastrophe will only grow.

"Pension funds are dependent on the future of the world economy and have the power to shape it. Councils must be willing to influence the pensions industry to ensure we all have a future worth retiring for."

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Meanwhile five local government funds elsewhere in the UK have committed to cut their fossil fuel investments: the Environment Agency Pension Fund, Haringey, Waltham Forest, Southwark and South Yorkshire.

Ric Lander, divestment campaigner at Friends of the Earth Scotland, and the report author says just three Scottish councils were found to be actively investing in socially and environmentally beneficial infrastructure.

The Strathclyde, Falkirk and Lothian Pension Funds invest a combined £234 million in renewable energy and social housing.

Unison's Scottish Organiser Dave Watson commented: "Too many of our pension funds are investing in obsolete technologies and risking our members hard earned contributions. The future of energy is green, and it is within sight. Our pension funds need to be part of the future, not the past."

In Scotland the Universities of Glasgow, Abertay, West of Scotland and Queen Margaret, along with the United Reform Church, have fully committed to divestment, whilst the Church of Scotland, Heriot-Watt and Edinburgh Universities have made partial commitments.