New analysis has found that around £2 billion is invested in fossil fuels from local council pension funds in Scotland.

Divesting in fossil fuels is not a new call from environmental campaigners, but activists in Scotland are renewing their pleads with council-run funds to move away from investing in oil and gas companies.

What are pension funds?

There are many different types of pension funds in the UK, but we are talking about workplace pension funds for public sector workers, most notably local council workers.

Essentially, if workers pay into the pension the employer will also contribute along with government support through tax relief.

Read more: Scottish council pensions have more than £2bn invested in fossil fuels

The idea is to pay enough into it that when it matures and you reach retirement age, workers have income to live off when they have stopped earning a salary.

The money that is put into the fund is invested in a range of industries and companies in order to help the pensions mature.

Who manages them for councils?

Even though pension funds are used by local authority staff, they are managed by a board or committee that is independent of the council.

So when councilors or councillors have agreed that pension funds should move away from investing in fossil fuels, it is not quite that simple.

Why are pension funds invested in fossil fuels?

The private equity investments that are made by the local authority pension funds can be made in a range of industries, including historically in energy companies, notably fossil fuel businesses.

From a business perspective, funds are invested where they can make money, with historically, no regard for the ethics of the business, including the climate crisis.

Why are fossil fuels bad for the environment?

Climate science has, for a long time, shown a correlation between burning fossil fuels like coal, oil and gas, and he rise in global temperatures.

In order to cut legal emissions and reach net zero targets, countries around the world need to reduce the amount of fossil fuels being burnt.

Read more: Investigation: Rishi Sunak's 'false' claim North Sea oil and gas cleaner than imports

Why do campaigners want pension funds to divest from fossil fuels?

One method of cutting fossil fuels used by environmental campaigners is to target the funding of oil and gas giants, including pushing for divestment.

The strategy sets out that pension funds should not invest in the fossil fuels industry.

Why haven’t pension funds divested yet?

Due to the complicated set-up of many council pension funds, it is not a straightforward task for them to divest from fossil fuels investments.

Read  more: Strathclyde Pension Fund denies it has backtracked on divesting from fossil fuels

For example, Glasgow City Council and Edinburgh City Council have passed motions supporting the divestment of pension funds away from fossil fuels.

But the member councils do not have permission to direct the fund – that is a task of the fund’s own committee and board, with the members bound by fiduciary duty – meaning they cannot prioritise their interests or that of the council over that of the fun.

Many councils have net zero targets and therefore will gradually wind down their portfolio of fossil fuels investments over time, but when their priority is to protect the assets of pension holders, it will take time to completely divest.