Tens of millions of pounds from West Midlands pension funds are being invested in food commodities – inflating global prices out of the reach of some in poorer nations, according to campaigners.
More than £44 million has been invested in food commodities by the West Midlands Pension Fund, which services more than 260,000 current and former employees of the region’s seven district councils.
Christine Haigh, policy officer at the World Development Movement (WDM), said the spending was contributing to volatility in food prices, which had a devastating effect on some of the poorest nations in the world.
The campaign group is calling for tough regulation to stop food speculation contributing to the global hunger crisis by driving prices up.
Ms Haigh told the Post: “The West Midlands Pension Fund is using some of the money to buy food commodities, which are essentially for the financial community invests in things like wheat or maize increasing in price in the future.
“They will be hoping that it increases in value to sell before it gets to the time the contract runs out.”
She added: “We have seen two things happen over the last 10 to 15 years, as before then the market was regulated against things like this.
“We have seen much more volatility – including spikes in food prices in 2008 and 2011 – and we have also seen food prices generally increasing.
“Food speculation helps to push up food prices which we feel in the UK but which has the biggest impact in countries with low incomes.
“In developing countries it can lead to malnutrition.”
A report published by WDM last week claimed that UK pension funds are betting an estimated £1.5 billion on food prices.
That means that the average pension saver was – largely unknowingly – investing around £180.
Ms Haigh said with pension automatic enrolment now being rolled-out in the UK, and expected to result in around eight million more people paying into pensions, she was fearful the amounts of money involved are only likely to increase.
The campaign group is calling for tough regulation to stop food speculation contributing to the global hunger crisis by driving prices up, and strong proposals are currently on the table in the European Union.
The report, Dangerous Futures – How Our Pensions Fuel Hunger, shows the West Midlands Pension Fund is the third-largest investor in food commodities of the UK pension funds, behind the BT Pension Scheme and the Railways Pension Scheme.
A spokesman for the West Midlands Pension Fund, which was most recently valued at £9.8 billion, said its strategy was based on a diverse range of investments, and hence it has a “small allocation” to commodities.
He said: “The Local Government Pension Scheme is controlled by government regulation and authorises the administering authority to make investments which are entirely directed to financially prudent investing that gives the best financial return for its members. This does mean that the fund holds investments that some would find objectionable.
“By their very nature commodities are a finite resource, and their price, whether energy, agriculture or metals, are determined by supply and demand, which may occasionally lead to price volatility.
“There are many factors influencing the latter, including government policy, global GDP, political stability and climate change, and the commodity traders will transact accordingly.
“The West Midlands Pension Fund welcomes any developments that help stabilise volatility in commodity prices on a sustainable basis.”