* Manchester says oil/gas exit would have cost 400 mln stg
* West Yorkshire says fund would have lost 200 mln stg
* London Pensions Fund Authority ditching some fossil fuels
By Maiya Keidan and Carolyn Cohn
LONDON, Jan 20(Reuters) - Several of Britain's top pension funds say they would have lost hundreds of millions of pounds had they sold out of oil and gas stocks in recent years, highlighting a potential cost to scheme members as funds face pressure to help fight global warming.
While some major investors globally have been making headlines by announcing fossil fuel divestment plans, several pension schemes in Britain warn there could be a big downside.
Schemes for Greater Manchester and West Yorkshire, which together manage 39.6 billion pounds ($51.4 billion) in assets, estimate in their annual reports they would have lost more than 600 million pounds combined had they divested from fossil fuels.
"We have to demonstrate that our investment decisions do not threaten ... financial performance," Greater Manchester, Britain's largest local government pension fund, said in the report for the 12 months to the end of March 2019.
Manchester said it had gained more than 400 million pounds in returns over a three-year period by remaining in energy stocks such as BP and Centrica.
West Yorkshire said in its annual report it would have lost around 200 million pounds had it sold holdings in oil and gas companies in the three years to September 2018 and reinvested in other UK stocks. It would have lost 160 million pounds in the three years to September 2019, a spokeswoman said.
Many other large schemes in Britain share their views.
Reuters contacted 47 of Britain's largest pension funds, with 33 saying they were not divesting from fossil fuels. Some highlighted the potential impact on returns, and their preference to engage with oil and gas companies as reasons.
Global policymakers, such as outgoing Bank of England governor Mark Carney, are concerned fossil fuel investments will lose value as economies switch to renewable energy to curb global warming.
Scandinavian pension funds and church groups and university endowments around the world have pulled out of fossil fuel investment, according to research by Fossil Free.
In Britain, smaller local government schemes have taken the lead, including Clwyd in Wales which is planning a new strategy involving divestment. Southwark in south London said divestment had helped it improve returns, but few large schemes are following suit.
Reuters asked 31 of the largest local government pension schemes in Britain and 16 more of the nation's biggest pension funds for their views.
"We feel committing to divest from fossil fuels at the present time would be not the right decision, because almost every business in the world to some extent depends on the use of fossil fuels," said Tamsin Rabbitts, senior accountant (pensions and treasury management) at Nottinghamshire County Council.
Nottingham's pension fund preferred to drive corporate change through engagement, Rabbitts said.
Divesting was "dangerous", another local authority pension fund manager said, because it risked lower returns.
Many big funds said they preferred to focus on companies' carbon footprint. Manchester said it was moving 2.5 billion pounds of the fund's assets into a low carbon strategy.
However, London Pensions Fund Authority said it was divesting and four more said they were reviewing their position, while nine made no comment or did not respond.
Universities Superannuation Scheme, one of Britain's biggest pension funds, said in a recent presentation it was considering whether there were assets which over time were "likely to wither and die or experience seismic shocks", without naming sectors.
Brunel Pension Partnership, which manages investments for 10 schemes, said it supported giving companies an ultimatum to clean up.
"A threat to divest ... forms part of a successful engagement approach," said Faith Ward, Brunel's Chief Responsible Investment Officer.
($1 = 0.7699 pounds) (Reporting by Carolyn Cohn and Maiya Keidan; additional reporting by Simon Jessop; Editing by Mark Potter)