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NEW - Guardian article: https://www.theguardian.com/environment/2016/feb/18/uk-councils-warned-of-severe-penalties-of-fossil-fuel-divestment
Divestment campaigners are worried that the government's current consultation on local authority pensions investment contains a significant attack on local democracy and ethical investment.
The main purpose of the proposed new rules will be to require local authorities to be more cost-effective by pooling their pension funds in larger groupings. But within the consultation are explicit restrictions on local authority ethical investment decisions. The main intent appears to be preventing boycotts of companies operating within the illegal settlements in the West Bank.
Divestment from the UK arms industry would also be forbidden: "using pensions and procurement policies to pursue boycotts, divestments and sanctions against foreign nations and the UK defence industry are inappropriate" (Research in 2007 revealed local council pension funds to have over £300 million invested in BAE alone).
It is acknowledged that local authorities may have regard to "environmental, social and corporate governance matters". But when the government is seeking to restrict local authorities' investment choices to prevent disinvestment in some areas, it is hard to be confident that restrictions on fossil fuel divestment will not follow within guidance (as yet unpublished). If local authorities have to stick to central government policy and invest in UK arms companies, will government be any keener to allow them to divest from fracking? New regulations would give the Secretary of State the power to intervene if a local authority is deemed not to be following government guidance.