November 16, 2015

Fossil fuel investments cost major funds billions

New tool analyzing Gates Foundation, Wellcome Trust, ABP, CPPIB and others shows high costs of not divesting from fossil fuels.


TORONTO, CANADA — Corporate Knights, together with and South Pole Group, has launched the Clean Capitalist Decarbonizer, an interactive tool that allows users to determine the financial impact of divesting from carbon heavy companies. Using this first-of-its kind tool, Corporate Knights analysed the investments of 14 funds totaling $1 trillion in assets, including the Gates Foundation and ABP, and determined that the scale of losses over the past three years exceeded US$22 billion.

The analysis covered recent disclosed holdings of 14 prominent funds1 to estimate the potential financial impact had they shifted their investments from the most carbon heavy coal and oil companies 2 and coal-intensive utilities3 to companies that derive at least 20% of their revenues from environmental markets or new energy4. From there, the total returns over a three year period starting on October 1, 2012 were calculated. This coincides with the first full quarter following founder Bill McKibben’s article in Rolling Stone, which launched the fossil fuel divestment movement.

“The analysis of 14 major funds, based on available data, found that carbon-intensive investments cost investors $22 billion in reduced returns. While incomplete disclosure limits the precision of analysis, the conclusion is unequivocal: decarbonizing portfolio holdings produced a better financial outcome in every case but one,” said Corporate Knights chief executive, Toby Heaps. “It helps explain why a growing group of investors 5  are voting with their dollars for less pollution and more environmental solutions.”

Some funds were found to have substantially higher exposure to carbon heavy companies, while others have quietly reduced, or in some cases completely eliminated, their major holdings exposure to the most carbon-intensive companies and as a result avoided significant financial losses. This comes on the heels of two reports: one from Oxford University which identified the fossil fuel divestment movement as the fastest growing divestment movement in history and wrote that “in almost every divestment campaign (…) from adult services to Darfur, tobacco to Apartheid, divestment campaigns were effective in lobbying for restricting legislation affecting stigmatized firms”. And another by Arabella Advisors, which found that the movement to divest from fossil fuels and invest in renewable energy and climate solutions grew 50-fold in only one year, topping $2.6 trillion in assets under management by institutions and individuals committed to divestment.

“Major funds have consistently outperformed major indices in the last three years, through decarbonizing their portfolios. Our wide coverage with over 40,000 considered companies and our methodology with over 800 approximation models guarantees the accuracy and pertinence of the Clean Capitalist Decarbonizer. We are excited to be part of this initiative,” says Maximilian Horster, Director Financial Services at South Pole Group.

The period of analysis coincides with a tough market for oil and commodity prices, and it is possible that over the next few years, some oil stocks and even coal utilities could partially recover; however, when considering the long-term, it is clear that there is a tenuous business case for remaining heavily invested in carbon intensive industries, as outlined by the Governor of the Bank of England Mark Carney. In failing to divest, institutions risk under-exposure to $3 trillion of public equities positioned to benefit from a more resource efficient and expanding low carbon economy.

“The impact of climate change will be a major investment theme in the next decade and investors who are at the forefront of addressing risks, such as stranded assets in their portfolio construction and security selection process, should be the beneficiaries of stronger long-term risk adjusted performance,” said Christopher Ito, Chief Executive Officer of Fossil Free Indexes. “We are pleased that the Carbon Underground 200TM has become a standard tool for investors as they evaluate their exposure to reserve owning companies. Historical results such as those indicated by the Clean Capitalist Decarbonizer begin to help shape the narrative, but going forward, the impact of climate change and future carbon pricing will likely have a more pronounced impact especially on those reserve owning companies whose business models and strategies are not consistent with the move toward a low carbon economy.”

While this analysis focused on the past three years, dating to the launch of the fossil fuel divestment movement, other analyses over a ten year period by MSCI and Fossil Free Indexes also found fossil free portfolios outperformed.

“The Decarbonizer will provide a deeper level of transparency in the discourse around the investments of some of the world’s most prominent institutions,” said Brett Fleishman, Senior Analyst at “The success of the divestment campaign is evidence that the tide is beginning to turn against fossil fuels. When the tool disclosed that the University of Toronto could have generated an excess return — big enough to have paid full tuition for the entire student body for all four years — if they had divested from fossil fuels when the campaign started, the conversation became grounded in the story of the institution itself. Divestment is the moral, prudent, and smart thing to do.”




Notes for Editors:

1 14 Funds analyzed


Size of fund in USD

Estimated Cost of not decarbonizing  3 years ago6

Algemeen Burgerlijk Pensioenfonds (ABP): “Dutch Civil Servants Pension Fund”)



Australian National University Endowment7



Canada Pension Plan Investment Board



Future Fund (Australia)



Bill & Melinda Gates Foundation Trust Endowment



Harvard University Endowment (Harvard Management Company)



London School of Economics Endowment



McGill University Endowment (McGill Investment Pool)7



New York City Employee Retirement System (NYCERS)7



Ontario Municipal Employees Retirement System (OMERS)7



Ontario Teachers’ Pension Plan (OTPP)



University of Toronto Asset Management Corporation



Vermont Pension Investment Committee



Wellcome Trust







About Corporate Knights: Corporate Knights publishes the award-winning business and society magazine Corporate Knights, and produces corporate rankings, research reports and financial product ratings based on corporate sustainability performance. Its best-known rankings include the Best 50 Corporate Citizens in Canada, and the Global 100 Most Sustainable Corporations. Corporate Knights research also powers the Newsweek Green Rankings.


About the Clean Capitalist Decarbonizer:  Created by Corporate Knights and powered by carbon data from South Pole Group, the Clean Capitalist Decarbonizer is a free interactive tool that shows the financial implications of divesting high carbon companies in favour of those that derive at least 20% of their revenues from environmental markets or new energy. The Clean Capitalist database covers 7,000 securities (comprising more than 85% of global market capitalization), including all primary public equity securities with a market cap over $2 billion and/or listed on major national and global indices. A professional version of the Clean Capitalist tool for the investment community will be launched at the upcoming Paris Climate Conference.


About South Pole Group: Zurich-based South Pole Group began as a project-driven company focused on developing and selling high-quality carbon credits. Today, it is the world’s leading provider of climate solutions. No other firm in the world has developed as many successful emission reduction projects. No other company offers as rich a suite of services and solutions. South Pole Group helps public and private sector organisations develop climate proven policies and strategies. Areas of expertise cover every key sustainability-related area of climate change, including but not limited to: forests & land use, water, sustainable cities & buildings, as well as renewable energy and energy efficiency. For more information, visit or follow the company @southpolegroup.

Nadia Kähkönen, Communications Manager, South Pole Group

Ph: +66 2 678 8977, email:


2 The Carbon Underground 200, originally pioneered by Carbon Tracker,  was provided by Fossil Free Indexes, and consists of the top 100 public coal companies globally and the top 100 public oil and gas companies globally, ranked by the potential carbon emissions content of their reported reserves.


3 The list of utilities which generate more than 30 percent of electricity from coal was provided by South Pole Group.


4 Companies providing environmental solutions derive at least 20% of their revenues from environmental markets or new energy as verified by FTSE Environmental Markets or Bloomberg New Energy Finance. The collective market capitalization of the companies providing environmental solutions totalled $3 trillion as of September 30, 2015.


5 Some examples of investors leading the way:  PFZW, the $183 billion Dutch pension fund has pledged to halve its carbon footprint by 2020 while increasing its investments in climate solutions fourfold. AXA, the French insurer with $1.6 trillion in assets under management, is selling off its stakes in mining companies and electric utilities deriving over 50% of their turnover from coal, while tripling its green investments. It is also notable that the French government recently amended legislation to require institutional investors to report their carbon footprints as well as how they are contributing to the international goal of limiting climate change. Bob Litterman, a former head of risk management at Goldman Sachs, is shorting carbon for higher returns. The Litterman-inspired WWF stranded assets total return swap is long S&P 500 and short “stranded” assets. It has returned more than 40 per cent for the World Wide Fund for Nature since January 2014. 23 investor signatories to the Montreal Carbon Pledge and Portfolio Decarbonization Coalition with assets totalling $1.2 trillion have pledged to reduce their portfolio carbon footprints by as much as 50%-80% without sacrificing financial returns, including the Swedish pension fund AP4 and French pension funds ERAFP and FRR.


6 Based on the difference of investing the estimated value of a fund’s public equities holdings (on Sept 30, 2012) in two simulated portfolios (Clean and Uncleaned), rebalanced quarterly over a three year time period to September 30, 2015. All evaluated funds were offered an opportunity to review the analysis in advance of its release. View full methodology here.


7 In the four cases where the fund did not have any companies classified as environmental solution providers, free float market capitalization weighting was used.


8 Money divested from carbon intensive companies was shifted into companies providing environmental solutions already existing in the investor’s portfolio. In Harvard’s case they had just one such company, a sustainable food, feed and fuel ingredients firm called Darling Ingredients, which performed poorly on the stock market over the past three years.



Contact: Toby Heaps, CEO Corporate Knights, +1 416 274 1432,