Image courtesy of OECD
Analysis of returns over the past 5 years shows that “investors who have dumped holdings in fossil fuel companies have outperformed those that remain invested in coal, oil and gas”. This recent article in the Guardian newspaper highlights analysis by MSCI, the world’s leading stock market index company, which found that “investors who divested from fossil fuel companies would have earned an average return of 13% a year since 2010, compared to the 11.8%-a-year return earned by conventional investors.” While it would be easy to dismiss these results by suggesting that the recent sharp decline in oil prices is the major cause, the MSCI analysis showed that “its ‘All Companies ex Fossil Fuels Index’ outperformed throughout 2012 and 2013, before the fall in the oil price.”
The analysis signals a growing demand for fossil free and low carbon investment options for institutional investors, which ultimately leads to more choice for all of us. The Guardian article indicates that “several major foundations and charitable institutions are in negotiation to switch their benchmark from the standard MSCI World Index to the ex-fossil fuel or low-carbon world indices, with announcements expected later this year. By switching benchmarks, institutions effectively divest from fossil fuels. The indices will also provide a stepping stone for pension funds to offer individual members a route to personally divest from fossil fuels.”