The Environment Agency’s pension fund owns stakes in a string of British water firms – despite the watchdog calling for industry bosses to be jailed over shocking pollution levels, the Guardian can reveal.
An analysis of the Environment Agency Pension Fund’s investments shows it holds shares or bonds worth £28m in six of the largest water companies.
Emma Howard Boyd, the chair of the EA, last month called for chief executives and board members to be jailed if they oversee serious, repeated pollution because they seemed undeterred by enforcement action and court fines for breaching environmental laws.
The EA found that seven water firms oversaw an increase in serious incidents last year compared with 2020, with 62 serious incidents of pollution for 2021 – the highest since 2013.
Filings for the year to 31 March 2022 show the fund has ploughed more than £3m into Southern Water, which the agency last month said had the highest total pollution rate in 2021. Southern was fined a record £90m in July last year after deliberately dumping billions of litres of raw sewage into protected seas, in a prosecution brought by the Environment Agency.
The fund’s largest water holding is in Thames Water, putting £12.8m behind the supplier, which dumped raw sewage into rivers 5,028 times in 2021.
The investor, which manages the pensions of retired and current staff at the government agency, has also put funds behind United Utilities, Severn Trent, Yorkshire Water and Anglian Water. Anglian last month handed its chief executive Peter Simpson more than £1m in pay and bonuses despite its poor pollution record.
When asked about the investments, former Undertones frontman Feargal Sharkey, who now campaigns on water issues said: “This yet again proves the complete obscenity that has become the regulation of the water industry.
“When the very parliamentary-appointed regulator whose function it is to oversee and minimise the environmental impact of the water industry is actually profiteering from that environmental impact as much as those company executives and the other shareholders, that’s an obscenity that needs to be stopped.”
The Environment Agency Pension Fund, which is part of the Local Government Pension Scheme, has 39,500 members, of which 11,300 are contributing, and £4.5bn assets under management. Its huge portfolio includes investments in blue chip stocks such as Tesco and Vodafone, as well as infrastructure companies.
Howard Boyd, who is also a government adviser on trade and a former director at the City fund manager Jupiter, steps down as chair of the agency in September. She also chaired the investment subcommittee at the Environment Agency Pension Fund until November 2020.
Sharkey said the investment role, alongside her position as chairman of the government agency, had constituted a “massive conflict of interest”. He added: “She needs to be sensitive enough to see the irony that water and sewage companies are currently under investigation by the EA and Ofwat for what the EA has referred to as widespread serious non-compliance with the regulations. It should have occurred to them not to invest in water companies.” The joint investigation into sewage treatment kicked off last year.
A spokesman for the Environment Agency Pension Fund said it was “legally separated” from the operational and regulatory functions carried out by the Environment Agency and is subject to “different legal rules, governance and decision making”. Decisions on investments are made by a third-party asset manager rather than the fund itself.
He added: “In all instances where the EAPF has exposure to UK water company investments, it is through portfolios managed externally by Brunel Pension Partnership, a pooling provider for Local Government Pension Funds.”
The agency is currently handling the impact of Europe’s most severe drought in decades which is hitting homes, factories, farmers and freight across the UK and the continent.
Sign up to the daily Business Today email or follow Guardian Business on Twitter at @BusinessDesk
The Liberal Democrats have called for water company bosses to be banned from giving themselves bonuses until they fix their leaky pipes. The party has found that England’s water and sewage company bosses have awarded themselves about £27m in bonuses over the past two years.
The study into the fund’s investments did not detail the split between shares and bond that are held in the water companies.