London CIV, which manages London local authorities’ pension investments, has been warned about the potential legal risks of yielding to pressure to divest from companies connected with Israel.

UK Lawyers for Israel (UKLFI) has written to Dean Bowden, chief executive of London CIV, raising concerns about calls from activist groups for Local Government Pension Scheme (LGPS) funds to sell holdings in companies alleged to be linked to Israel.

London CIV pools and manages the investment of tens of billions of pounds in pension assets on behalf of London Boroughs.

In its letter, UKLFI argues that pension fund managers are bound by strict fiduciary duties to act in the financial interests of scheme members and warns that those duties could be breached if investment decisions are influenced by political campaigns.

UKLFI explained that non-financial factors can only be considered if two conditions are both met: there must be good reason to believe that scheme members share the concern, and the decision must not risk significant financial detriment to the fund.

These principles were set out by the Law Commission and have been endorsed by the UK Supreme Court. The application of these conditions to LGPS funds is also mandated by government guidance which administering authorities are required to apply in accordance with statutory regulations.

This statutory requirement, in particular, excludes any argument that these conditions are overridden by international law, as suggested in a “position paper” circulated by the Palestine Solidarity Campaign (PSC). UKLFI’s letter explains that the conclusions of this paper are wrong for this and other reasons.

According to UKLFI, both of the pre-conditions for considering non-financial factors would be difficult to satisfy in the case of divestment campaigns relating to Israel, which it describes as likely to be highly controversial among pension scheme members.

The organisation also warns that excluding defence businesses and leading tech companies from investment portfolios could have significant financial consequences for pension funds over the long term. UKLFI draws attention to a study which found that divestment from top Palestinian BDS targets would have reduced the value of a fund invested according to a typical diversified equity index by 50% of its original value after 10 years.

The letter further raises concerns in relation to the Public Sector Equality Duty under the Equality Act 2010. UKLFI argues that campaigns singling out Israel harm community relations and contribute to hostility towards Jews, Israelis and Zionists.

Public authorities, and bodies exercising public functions, are required under the legislation to have due regard to the need to eliminate discrimination and foster good relations between groups with different protected characteristics.

UKLFI also questions the political balance and reliability of some of the sources of information which London CIV appeared to approve in a statement on Israel in June 2025. It points out that reliance on these sources as “politically balanced” and “thorough” could expose London CIV and its staff to liability for failing to exercise due skill and care.

The lawyers’ group welcomed a September 2025 update from London CIV emphasising its core duty “to deliver secure pensions for local government workers and, equally important, to ensure that promise is sustainably upheld so taxpayers are never left to pick up the pieces.” However, it expressed concern that an earlier statement issued by London CIV about Israel and the Occupied Palestinian Territories could be interpreted as supporting the consideration of non-financial factors in investment decisions even when the Law Commission’s two conditions are not met.

Jonathan Turner, chief executive of UK Lawyers for Israel, said the organisation hoped its letter would assist London CIV and its member authorities in ensuring that investment decisions comply with the law. He commented: “Local government pension funds exist to provide secure pensions for retired staff. Investment decisions must be made in accordance with fiduciary duties and other legal obligations. We hope London CIV will confirm that its investment management on behalf of London local authorities will continue to comply with these requirements.”