Climate campaigners are urging pension funds to divest from fossil fuels following a study revealing substantial financial losses incurred by major U.S. funds due to investments in the oil, gas, and coal sectors.
Pension Fund Investments Reveal $21 Billion In Fossil FueL Losses
Stand.earth, in collaboration with the University of Waterloo, analyzed the public equity portfolios of pension funds including CalPERS, ARMB, and NYSTRS. The study, published recently, showed that despite record profits in the fossil fuel industry, the funds would be worth $21 billion more today if they had not invested in fossil energy. CalPERS alone lost $4.7 billion, equating to an average loss of $3,163 per pensioner.
Bill McKibben, the co-founder of 350.org, emphasized that the underperformance of fossil fuels compared to renewable energy has negatively affected shareholders. Stand.earth highlighted that even during periods of high fossil fuel sector performance, divestment did not significantly impact financial returns. The report indicated an average 13-percentage-point higher return on investment over the past decade if funds had divested from fossil fuels.
Climate advocates argue that divestment is not only essential for the planet but also aligns with the fiduciary duties of public pension funds. Tom Sanzillo from the Institute for Energy Economics and Financial Analysis noted that despite reported record profits, the future of the oil and gas sector is uncertain, and their revenues are unsustainable.
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Study Shows Decade-old Divesting PensionFunds Reduced Carbon Footprint, Climate Risks
The study also revealed that divesting from fossil fuels a decade ago would have substantially improved pension funds’ carbon footprint, reducing emissions by 16.6% or nearly 280 million tons. Divestment not only brings financial benefits but also mitigates climate risks, leading to safer pensions for beneficiaries.
“Influential investors, like these large public pension funds, can bring about positive change on a few fronts,” said Olaf Weber, a sustainable finance professor at the University of Waterloo and co-author of the report. “Energy divestments can create higher returns for the funds, which leads to higher returns for the beneficiaries and reduced exposure to climate risks. Consequently, it leads to safer pensions.”
The findings have prompted climate campaigners to call for urgent action, urging pension funds to reconsider their investments in fossil fuels. By divesting from these sectors, funds can not only protect the environment but also safeguard the financial interests of pensioners. With renewable energy alternatives offering cheaper and cleaner solutions, the underperformance of fossil fuels has become increasingly apparent.
Moreover, even during periods of economic success for the fossil fuel industry, divestment has not had a significant negative impact on financial returns. In fact, the study revealed that funds would have seen an average return on investment 13 percentage points higher over the past decade if they had divested from fossil fuels.
The financial argument for divestment is further strengthened by the uncertain future of the oil and gas sector. Despite recent record profits, the sector’s revenues are deemed unsustainable, and their long-term viability is in question. By divesting fossil fuels, pension funds can reduce their exposure to these risks and potentially achieve higher and safer returns.
Furthermore, the study highlighted the significant carbon footprint reduction that would have been achieved if pension funds had divested from fossil fuels earlier. A decade ago, divestment would have resulted in a 16.6% decrease in emissions or nearly 280 million tons. This demonstrates that divestment is not only a responsible choice but also contributes to the urgent global goal of mitigating climate change.
In summary, the study’s findings emphasize the financial and environmental benefits of divestment from fossil fuels. Climate campaigners urge pension funds to prioritize the well-being of both their beneficiaries and the planet by divesting from the oil, gas, and coal sectors. By doing so, funds can align with their fiduciary duties, mitigate climate risks, and secure safer pensions for future generations.
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