OAKLAND — Two new analyses of stock market performance have found that stockholder portfolios without fossil fuel energy producers do better than those with investments in energy companies that create carbon pollution.
In a report entitled Beyond Fossil Fuels: The Investment Case for Fossil Fuel Divestment, Impax Asset Management tracked the past seven years of international equity markets, showing that if fossil fuel companies are removed from the MSCI World index, then the resulting portfolio would have made 2.3% per year. A portfolio with fossil fuel companies like Exxon and Chevron would net an average annual return of 1.8% for the same period.
Impax author’s wrote: “The 200 largest listed fossil fuel companies had a market value of some $4 trillion at the end of 2012, but the models used to make those valuations do not take into account how credible action to address climate change might slash the value of their fossil fuel reserves.”
Earlier this month, Norwegian pension fund and insurer Storebrand moved to divest funds from tar sands production and Holland-based Rabobank announced it will stop lending money for unconventional energy extraction projects like shale gas. The moves follow the release of a new analysis of UK-based think tank Carbon Tracker’s latest Unburnable Carbon report, which said 80% of fossil fuel reserves need to be left in the ground if the worst effects of climate change are to be avoided.
Christine Tørklep Meisingset, Storebrand’s head of sustainable investment, was quoted as saying ”these resources are worthless financially…they do not contribute to sustainable development in the extent and the pace we want.”
“It’s almost as if the financial sector is in a race with climate activists to see who can discredit the fossil fuel industry the fastest,” said Phil Aroneanu, 350.org co-founder and US Campaigns Director. “It’s becoming increasingly clear that the smart money is going against the carbon polluters, right when we need climate action so desperately.”
Environmentalist and 350.org founder Bill McKibben helped launch a fossil fuel divestment campaign last November with a 21-city US tour urging college students and activists to take up the cause. Since then, the campaign has spread to over 300 colleges and universities and more than 100 cities, states and religious institutions.
In the fall, McKibben will be touring Europe with his “Do the Math” show. Stops include Berlin, Amsterdam, Birmingham, and London.
More than 15 US city councils and mayors have committed to pursue fossil fuel divestment, including the San Francisco Board of Supervisors who voted unanimously in April to urge the city’s retirement board to divest over $583 million from the fossil fuel industry. Six colleges and universities have also agreed to divest, from San Francisco State University to Unity College in Maine. A growing number of religious institutions are also taking up the cause: The United Church of Christ, claiming 1.1 million members in 5,100 congregations passed a resolution to divest over the next five years at their General Synod in June.
The Fossil Free divestment campaign is supported by 350.org, As You Sow, Energy Action Coalition, Responsible Endowments Coalition, and the Sierra Student Coalition.