Environment Watchdog Has Financial Interest In Companies It Regulates

The chief government regulator tasked with policing the water industry has invested millions of pounds into businesses connected to the sector, financial records have shown.

The Environment Agency’s pension fund has invested £5.05m in shares of private water companies or their parent firms, making it a part owner of some of the very companies it regulates.

The findings have sparked warnings of a potential conflict of interest, as it means that the regulator’s own pension pot’s finances were reliant on the profitability and ongoing high dividends of the companies it regulates.

Environmental charity Greenpeace and the head of the Commons Environmental Audit Committee both suggested to PoliticsHome that the regulator should divest from these companies that it directly regulates. 

The biggest investment was over £2.1m in shares of JP Morgan and the Macquarie Group, the two investment banks that are the primary shareholders and owners of Southern Water.

In 2021, the Environment Agency fined Southern water a record £90m for its repeated, deliberate dumping of raw sewage into the region’s rivers and seas.

But cases like that are increasingly the exception. A leaked report in late 2022 found the regulator’s management was refusing to prosecute in 93 per cent of the cases where its frontline staff had gathered evidence of serious pollution and pushed for the offenders to face sanctions.

The regulator has also failed to regularly audit water companies to check they are telling the truth about pollution and illegal sewage dumping.

The regulator also had major investments in United Utilities and Severn Trust, as well as CK Hutchison and its subsidiaries (the owner of Northumbrian Water) and Blackrock (which has major stakes in Severn Trent,