It would be a better investment than “fossil fuel, arms and tobacco industries” when ethical considerations are taken into account, according to Holyrood local government committee.
About £26 billion is currently sitting in 11 different pensions funds which cover all of Scotland’s councils to be paid out when workers retire. About half of this is invested in overseas shares of multinational corporations and about a quarter in shares in UK firms.
There is “very little investment in local infrastructure” today’s report states.
There is a lack of expertise in infrastructure investment, along with a “cautious approach to risk” among fund managers, MSPs found.
But the report states: “Without some degree of risk taking, innovation will not happen.”
Strathclyde and Greater Manchester are among the pension funds in the UK which already invest in schemes like the Athletes village for the Glasgow 2014 Commonwealth Games and other social housing.
Committee Convener, Kevin Stewart said: “Whilst there are some risks associated with investing in infrastructure, these can be reconciled given the long-term nature of these investments together with their positive social and economic impact.
“By working collaboratively Pension Funds could maximise their returns, share expertise and reduce investment costs. The returns should also be measured in terms of growth to communities.”
Of the 11 Scottish funds, only five have made, or intend to make, investments in infrastructure. Others mentioned “aspirations” to do so.
Strathclyde currently has 14 separate infrastructure and related investments with a total value of around £350m, including two in Scotland, 11 Uk-wide and one global. Lothian has £300m investment in infrastructure, 6% of its total assets, including the UK. Falkirk has made a £30m commitment to invest in affordable housing.
Councils should also maximise the opportunities presented by “City Deals” to improve local building projects, MSPs say. These see cities given economic and spending powers to boost local growth.
Mr Stewart added: “City Deals offer unique opportunities to invest in strategic infrastructure projects and we look forward to seeing measurable benefits emerge for communities and the wider surrounding areas. However there needs to be careful governance to ensure plans flourish and other areas benefit from good practice.”