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* Manchester says oil/gas exit would have cost 400 mln stg
* West Yorkshire says fund would have lost 200 mln stg
* London Pensions Fund Authority ditching some fossil fuels
By Maiya Keidan and Carolyn Cohn
LONDON, Jan 20(Reuters) - Several of Britain's top pension
funds say they would have lost hundreds of millions of pounds
had they sold out of oil and gas stocks in recent years,
highlighting a potential cost to scheme members as funds face
pressure to help fight global warming.
While some major investors globally have been making
headlines by announcing fossil fuel divestment plans, several
pension schemes in Britain warn there could be a big downside.
Schemes for Greater Manchester and West Yorkshire, which
together manage 39.6 billion pounds ($51.4 billion) in assets,
estimate in their annual reports they would have lost more than
600 million pounds combined had they divested from fossil fuels.
"We have to demonstrate that our investment decisions do not
threaten ... financial performance," Greater Manchester,
Britain's largest local government pension fund, said in the
report for the 12 months to the end of March 2019.
Manchester said it had gained more than 400 million pounds
in returns over a three-year period by remaining in energy
stocks such as BP and Centrica.
West Yorkshire said in its annual report it would have lost
around 200 million pounds had it sold holdings in oil and gas
companies in the three years to September 2018 and reinvested in
other UK stocks. It would have lost 160 million pounds in the
three years to September 2019, a spokeswoman said.
Many other large schemes in Britain share their views.
Reuters contacted 47 of Britain's largest pension funds,
with 33 saying they were not divesting from fossil fuels. Some
highlighted the potential impact on returns, and their
preference to engage with oil and gas companies as reasons.
Global policymakers, such as outgoing Bank of England
governor Mark Carney, are concerned fossil fuel investments will
lose value as economies switch to renewable energy to curb
global warming.
Scandinavian pension funds and church groups and university
endowments around the world have pulled out of fossil fuel
investment, according to research by Fossil Free.
In Britain, smaller local government schemes have taken the
lead, including Clwyd in Wales which is planning a new strategy
involving divestment. Southwark in south London said divestment
had helped it improve returns, but few large schemes are
following suit.
Reuters asked 31 of the largest local government pension
schemes in Britain and 16 more of the nation's biggest pension
funds for their views.
"We feel committing to divest from fossil fuels at the
present time would be not the right decision, because almost
every business in the world to some extent depends on the use of
fossil fuels," said Tamsin Rabbitts, senior accountant (pensions
and treasury management) at Nottinghamshire County Council.
Nottingham's pension fund preferred to drive corporate
change through engagement, Rabbitts said.
Divesting was "dangerous", another local authority pension
fund manager said, because it risked lower returns.
Many big funds said they preferred to focus on companies'
carbon footprint. Manchester said it was moving 2.5 billion
pounds of the fund's assets into a low carbon strategy.
However, London Pensions Fund Authority said it was
divesting and four more said they were reviewing their position,
while nine made no comment or did not respond.
Universities Superannuation Scheme, one of Britain's biggest
pension funds, said in a recent presentation it was considering
whether there were assets which over time were "likely to wither
and die or experience seismic shocks", without naming sectors.
Brunel Pension Partnership, which manages investments for 10
schemes, said it supported giving companies an ultimatum to
clean up.
"A threat to divest ... forms part of a successful
engagement approach," said Faith Ward, Brunel's Chief
Responsible Investment Officer.
($1 = 0.7699 pounds)
(Reporting by Carolyn Cohn and Maiya Keidan; additional
reporting by Simon Jessop; Editing by Mark Potter)
