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David Barnhill, Director
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You are here: Home > Climate Change > DIVESTMENT > Financial Analyses of Fossil Fuel Divestment

Financial Analyses of Fossil Fuel Divestment

What is involved in fossil fuel divestment? How could it be done? Would it be a responsible path for a university to take? Here are some sources that investing with climate change in mind is a reasonable and researched approach.

Beyond Fossil Fuels – The Investment Case for Fossil Fuel Divestment. Impax Asset Management.
Analysis of historical data shows that over the past seven years eliminating the fossil fuel sector from a global benchmark index would have actually had a small positive return effect. Furthermore, much of the economic effect of excluding fossil fuel stocks could have been replicated with ‘fossil free’ energy portfolios consisting of energy efficiency and renewable energy stocks, with limited additional tracking error and improved returns.

Climate Proofing Your Investments: Moving Funds Out of Fossil Fuels. The Australia Institute. March 2014.
Working within the Australian context, this analysis details a variety of responses to investments in fossil fuel companies. It also concludes that divestment will not incur significant increase in risk or decrease in returns.

Divesting in Fossil Fuels Creates Financial Security. Mosaic, 2013.
By investing in more resilient and sustainable market choices, and divesting in fossil-fuels, people can begin eliminating future risk associated with climate change. Divesting in these high-risk fossil fuel options is both a socially and fiscally responsible choice.

Do the Investment Math - Building a Carbon Free Portfolio. Aperio Group. 2013. 
“An analysis released on Tuesday by the Aperio Group, an investment-management firm that offers its clients a “socially responsible index,” among other investment strategies, found that while divesting from fossil-fuel companies does not necessarily add value to a portfolio, it does not subtract value from it either, and it increases the risk to investors at such a modest level as to be negligible.” (Chronicle of Higher Education, 29 January 2013.)

Fossil Fuel Divestment: Risks and Opportunities. Advisor Partners.

Responding to the Call for Fossil-Fuel Free Portfolios. MSCI ESG Research. June 2013.
The performance of the MSCI ACWI IMI
excluding the carbon reserve stocks closely tracked the MSCI ACWI IMI over the time series. Slight underperformance of the “ex Carbon list” appeared near the beginning of the time series, and slight outperformance of the “ex Carbon list” emerged toward the end of the time series. The active return differential over the entire time series was 1.2 percent (120 basis points) in favor of the “ex Carbon list” relative to the full MSCI ACWI IMI. The tracking error relative to full index was 1.9 percent (190 bps).

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Divesting From Fossil-Fuel Companies Is Unlikely to Harm Endowments, Report Says. Chronicle of Higher Education, 29 January 2013.

The Financial Case for Divestment of Fossil Fuel Companies by Endowment Fiduciaries. Bevis Longstreth, former SEC Commissioner. 2 November 2013.

by Barnhill, David L last modified Oct 07, 2014 10:45 AM
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