Members of the scheme would each be hundreds of pounds better off if funds had been divested from fossil fuels, say campaigners

The pension funds of millions of local government workers have lost hundreds of millions of pounds in the last 18 months, as the value of the world’s biggest coal mining companies has crashed, according to a new analysis.

The Local Government Pension Scheme (LGPS) provides pensions for 4.6m people, including social workers, school staff, bus drivers, librarians, park attendants and housing officers. The losses estimated by campaign group Platform are equivalent to hundreds of pounds per member.

The analysis is part of the fast-growing fossil fuel divestment campaign, which has already persuaded investors managing over $2.6tn in assets to sell off their coal, oil and gas stocks.

Most existing fossil fuel reserves must stay in the ground to avoid catastrophic global warming, scientists have shown. Institutions including the World Bank, the G20 and city analysts are concerned that, if the world’s nations crack down on carbon emissions to halt climate change, those reserves will lose their value. Bank of England governor Mark Carney warned recently that the losses were “potentially huge”.

“Carney is right, but this is a problem for today, not tomorrow,” said Platform researcher Mika Minio-Paluello. “If LGPS funds had divested from coal and reinvested into public transport and social housing two years ago, then pension holders, the climate and public services would all be better off.”

Platform’s analysis is based on detailed data on the investments held by the 99 local funds that make up the LGPS, released under freedom of information rules. Overall, the data shows £14bn of the £231bn held by LGPS funds is invested in fossil fuels.

Over 60 of the LGPS funds disclosed investments in the mining giants Anglo American, BHP Billiton, Glencore and Rio Tinto. Their shares have fallen sharply over the last 18 months, as the price of the commodities they produce, including coal, has plummeted. Anglo American has the fifth biggest coal reserves of any publicly traded company in the world, with BHP sixth, Glencore in 11th place and Rio Tinto 24th.

Platform’s data on the LGPS’s investments in the four mining companies is the most recent available, from April 2014, and the group calculated the impact of those companies’ falling share prices over the following 18 months at £683m.

The Greater Manchester Pension Fund, one of the largest, lost £148m but declined to comment on this. A spokesman for the fund said previously: “It is critical that we assess all financial risks to the fund, including those posed by fossil fuels [but] there are no plans to disinvest from fossil fuel companies in the medium term.”

Another large scheme, the Strathclyde Pension Fund (SPF) lost £26m. “SPF’s main exposure to coal and other fossil fuels is through its listed equity portfolios and the value will vary substantially over time, dependent on the decisions made by active managers,” said an SPF spokesman. “We are a large fund, but our percentage exposure is actually pretty average within our sector.”

Natalie Smith, a lawyer at Client Earth, said pension fund managers could ultimately be sued if they ignored the potential risks of fossil fuel investments. “If pension fund trustees fail to properly manage these risks in their investment decision-making process, and there is a consequential decline in value of the [fund], then trustees and investment managers could be sued for breaching their fiduciary duties.”

A plan to use the assets of 89 of the LGPS funds to invest in local infrastructure was announced by Chancellor George Osborne on 5 October, who said he wanted to create instead six “British wealth funds” spanning the country. “It will save hundreds of millions in [duplicated] costs and fees, and crucially they’ll invest billions in the infrastructure of their regions,” he said.

But Brian Strutton, national secretary of the GMB union, which represents local government workers, said: “The only reason more of the LGPS assets are not invested in infrastructure is because the risk outweighs the returns. Mr Osborne needs to remember these are council workers’ pension savings that need to be invested as efficiently as possible, they are not to be used as politician’s playthings.”