Dundee and Fife councils have been criticised for investing a total of more than £200 million of pension funds in fossil fuel companies.
Dundee has committed £131 million to the oil, gas and coal industries, and avoided any investment in renewable energy alternatives.
A new report shows the Tayside Pension Fund, which is administered by the city council, has heavily invested in BP and BHP Biliton, which is currently facing prosecution in Brazil over the country’s worst environmental disaster.
In comparison, the Fife Council Pension Fund has made investments of £89.6 million in fossil fuels.
Report author Ric Lander, divestment campaigner at Friends of the Earth Scotland, said local authorities should be changing the focus of their investments.
“Council pension funds have huge clout and can shape our future,” he said.
“It’s time they used this power to invest in a future worth living in.
“Only three councils have any investments in social housing and renewable energy in Scotland despite strong returns available and many local benefits of these schemes.
“The majority of council pensions are invested in stocks and shares, which bring few tangible local benefits.
“Divesting from fossil fuels is an opportunity to contribute to a brighter future.
“That would be good news for Tayside Pension Fund members and good news for all of us. With Scotland going to the polls for local elections in May we want to see prospective councillors getting serious about responsible investment.”
The Tayside Pension Fund currently invests £3.3 million in BP, £6.1 million in BHP Billiton and £37.9 million in Shell, among other companies.
It is the second largest investor in fossil fuel of any Scottish council pension fund, falling only behind Strathclyde.
The report, published by Common Weal, Unison Scotland and Friends of the Earth Scotland, also showed Tayside was not investing anything in renewable energy or social housing projects in Scotland.
Elsewhere in the UK, five local council pension funds have committed to cut their fossil fuel investments, but no such commitments have been made in Scotland.
A Dundee City Council spokesman highlighted reports from council meetings held last year which outline their policies surrounding fossil fuel investments.
These include an environmental, social and corporate governance policy which requires all active investment managers be signatories to the United Nations Principles of Responsible Investment and engages independent governance and shareholder advisory services.
A report from the June 6 2016 meeting of the pension sub-committee of the policy and resource committee and pension board says: “Whilst there are arguments for immediate divestment, there are also a number of counter arguments stating that there are also costs and risks associated with these proposals which are not easily quantified.”
Fife Council’s head of finance Keith O’Donnell commented: “Our Superannuation and Pensions sub-committee works to a set of investment principles. These are in place to ensure investment managers consider the social, environmental and ethical policies of companies in which they invest.
“We are committed to a balance between maximising investment income and ethical investment which is why we employ Hermes Equity Ownership Services (HEOS).”