The rainbow flag flew above the Bourne Corn Exchange as South Kesteven council embraced LGBT history month.
A year after voting against such a gesture the Lincolnshire local authority declared itself pleased “to celebrate and recognise the […] rights of lesbian, gay, bisexual and transgender people”, hoisting the flag outside its headquarters in 2019.
Across Britain, many other councils regularly follow suit, showing solidarity with their LGBT residents through their support of events such as Pride marches.
Yet, as a Guardian investigation reveals, at least 28 councils – including South Kesteven – have been quietly depositing more than £1bn of taxpayers’ money into accounts at Qatar National Bank (QNB), the state lender in a country where fans who display rainbow flags at next month’s World Cup may have them confiscated “for their own protection”.
The investments pose a moral dilemma for western institutions dealing with the tiny, gas-rich Gulf emirate – whether to prize financial returns over principles.
Some councils have pulled money out of QNB due to ethical concerns about Qatar, which has said it will welcome LGBT fans but where homosexuality is illegal, women are second-class citizens and migrant workers have died in their thousands.
But others have carried on with the investments, described by the human rights campaigner Peter Tatchell as “shocking”.
Investment firms, including Halifax and Hargreaves Lansdown, that flaunt their credentials on diversity, inclusion and labour rights, have also poured cash into accounts with the lender. Halifax does not appear to disclose this publicly.
The investments take the form of funds deposited with QNB, which is 50%-owned by the Qatar Investment Authority, the $450bn sovereign wealth fund of the gas-rich emirate.
Amid mounting criticism of Qatar’s record on human rights, the World Cup offers an opportunity for the emirate’s ruling elite to secure their place at the top table of global culture, politics and business.
Qatar National Bank has played a key role in laying the groundwork for the sporting extravaganza.
During the event itself, QNB will be the sole provider of cash machines at games in stadiums. More importantly, QNB helped fund the estimated $220bn of the tournament. According to its annual reports, the bank financed the Education City stadium, where nine matches will be played, as well as infrastructure projects to ensure everything goes off without a hitch.
Few people in the UK will suspect that, in paying their council tax, they may have indirectly helped QNB bankroll these investments.
Yet freedom of information requests to every local authority in the UK show that at least 27 have invested more than a combined £1bn with QNB since 2017.
They do so as part of “treasury management” – effectively the storage of council tax money due to be spent on crucial public services.
Their deposits at QNB, which has just one branch in central London, reflect the search for yield that more than a decade of ultra-low interest rates has foisted on investors, from local authorities to high street banks.
QNB pays a healthy rate of interest – nearly 4% in some cases, according to council disclosures – a useful return for councils struggling with cuts to central funding.
Most told the Guardian that this was in line with their investment strategy. But not everyone in local government appears to agree that depositing cash with QNB is appropriate.
Spokespeople for Trafford and Blaby, both of which have invested in QNB in the past, told the Guardian that they had stopped doing so, citing their ethical investment policies.
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Ryedale said it did not have an alternative at the time it did deposit cash with QNB but admitted that the investment had been a “mistake” and said it would not do so in the future for ethical reasons.
In Reading, the Green party councillor Josh Williams raised an objection to the council’s investments in a country with a “lamentable” human rights record, warning that Reading citizens might draw the conclusion that the council was “happy to invest millions of pounds in a country that would imprison homosexual men”.
Reading’s last investment was in July 2022. It says QNB’s sustainability policy means it meets the council’s investment criteria but that it has suspended further investments.
Councils that still had millions invested with QNB as of October 2022 include South Kesteven, Argyll and Bute, Swindon and Portsmouth.
“It’s shocking to learn that local authorities are depositing council taxpayers’ money with a state-controlled bank in such a homophobic country as Qatar,” said Tatchell.
“Through these deposits, local authorities are supporting a bank that funds the World Cup and sustain a regime that stands accused of human rights abuses against LGBT people, women and migrant workers.”
Anyone who invests in shares may also have unwittingly contributed to the volume of cash deposited at QNB.
The Financial Conduct Authority’s client assets sourcebook regime (Cass) requires stockbrokers to deposit customer money with a panel of major banks, to ensure that funds could be recovered if the brokerage went bust.
The banks receiving the deposits typically include well-known UK lenders but some share-dealing brands, including firms that publicly support LGBTQ+ rights, use QNB.
Earlier this year, Halifax won praise when it gave staff the option to display pronouns on their name badges and told customers who objected to the move that they should close their accounts. The bank also espouses its commitment to gender equality.
But the Guardian understands that the lender’s share dealing arm, which manages £1.5bn of money on behalf of its clients, has more than £300m with QNB.
Same-sex sexual activity is prohibited under Qatar’s 2004 penal code, which criminalises acts of “sodomy” and “sexual intercourse” between people of the same sex. Women must obtain permission from a male “guardian” in order to make key decisions about their lives, such as reproductive healthcare or overseas travel, according to a 2021 report by Human Rights Watch.
By contrast, Hargreaves Lansdown sponsors Bristol Pride and has won awards at the event thanks to its credentials as an LGBT employer.
Yet the company, which also boasts that it is a living wage employer, deposits up to 8% of clients’ cash – suggesting a maximum of £1.5bn – with QNB.
Fellow stockbroker AJ Bell also lists QNB among the banks it uses, with a maximum of 35% of client money helped there, implying up to £34m.
Not all stockbrokers publish the panel of banks they use to store clients’ cash, meaning many more may have deposited funds with QNB.
QNB did not answer requests for comment. Hargreaves Lansdown and Halifax declined to comment.
A spokesperson for AJ Bell said: “We evaluate and monitor a number of factors when assessing which banks to use to hold cash,” adding that this “includes a bank’s independently assessed ESG or ethical rating”.