Members of the committee were told that divestment was not an effective way to make “real world” change happen and should be kept as a last resort.
Instead, they should be working with firms and like-minded investors to help force change in company behaviour, while protecting jobs and communities by moving towards ‘a just transition’ away from oil and gas.
Falkirk Council’s finance manager, Bryan Smail, said: “What’s your objective? Is it to make a statement or a gesture or are you actually looking to make real change on the ground?
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“That’s the question each of us need to ask ourselves in this debate.”
With the major climate emergency conference, COP26 underway, the issue could hardly be more topical.
Falkirk Council is just one of around 30 other employers, including Stirling and Clackmannanshire Councils, who are members of the same pension fund, which has a legal responsibility to get the best returns on any investment.
Campaigners from pressure groups such as Friends of the Earth and Divest Falkirk have argued that investments in fossil fuels are actually losing money as the world transitions to greener energy.
In recent weeks, the committee had been urged to consider divesting from fossil fuels by Stirling Council as soon as was practically possible, while Falkirk Council’s executive had also urged them to look carefully at the issue.
A report to members revealed that currently, the Fund’s direct fossil fuel holdings (primarily Shell, BP and Centrica) amount to about £50 million (or 1.5 per cent) of total fund assets of £3 billion.
The committee took advice from David Hickey, an expert in responsible investment from Lothian Pension Board.
He said: “We are united as a group that our aim is real world decarbonisation as a key goal.
“And the consensus is that we do this through engagement rather than divestment.”
“I’ve got to admit it’s hard – we’re on the verge of a giant transition.
“It’s going to be very difficult and it’s going to take bravery and nerve to work with companies to help but only that way will we be delivering real world change.”
“Divestment, although it greens your portfolio, it doesn’t change the situation in the real world.”
Falkirk Council’s finance director Bryan Smail’s report also listed several things the fund is already doing .
These include making a £150 million commitment (six per cent of Fund) to an environmentally themed mandate, which mostly invests in companies whose businesses are mainly in clean energy and water, pollution control, agriculture and forestry.
The Fund has also made investments in renewable and low carbon ventures, including wind farms, solar parks and hydro-electric schemes.
And it has also sponsored high profile climate resolutions at AGMs (Barclays, BP) helping change company policy.
However, the advisers say the key is to be able to choose when divestment is appropriate – and they will do so if necessary.
“If a company is playing at this and shows no appetite for change then ultimately we will divest,” said Mr Smail.
“It’s not that divestment is off the table – it’s there as an option.”