Download Fossil fuel investments cost major funds billions

FORIMMEDIATERELEASE
November16,2015
Contact:TobyHeaps,CEOCorporateKnights,+14162741432,[email protected]
Fossilfuelinvestmentscostmajorfundsbillions
NewtoolanalyzingGatesFoundation,WellcomeTrust,ABP,CPPIBandothersshowshighcostsofnot
divestingfromfossilfuels.
TORONTO,CANADA--CorporateKnights,togetherwith350.organdSouthPoleGroup,haslaunched
theCleanCapitalistDecarbonizer,aninteractivetoolthatallowsuserstodeterminethefinancialimpact
ofdivestingfromcarbonheavycompanies.Usingthisfirst-of-itskindtool,CorporateKnightsanalysed
theinvestmentsof14fundstotaling$1trillioninassets,includingtheGatesFoundationandABP,and
determinedthatthescaleoflossesoverthepastthreeyearsexceededUS$22billion.
Theanalysiscoveredrecentdisclosedholdingsof14prominentfunds1toestimatethepotential
financialimpacthadtheyshiftedtheirinvestmentsfromthemostcarbonheavycoalandoilcompanies2
andcoal-intensiveutilities3tocompaniesthatderiveatleast20%oftheirrevenuesfromenvironmental
marketsornewenergy4.Fromthere,thetotalreturnsoverathreeyearperiodstartingonOctober1,
2012werecalculated.Thiscoincideswiththefirstfullquarterfollowing350.orgfounderBillMcKibben’s
articleinRollingStone,whichlaunchedthefossilfueldivestmentmovement.
“Theanalysisof14majorfunds,basedonavailabledata,foundthatcarbon-intensiveinvestmentscost
investors$22billioninreducedreturns.Whileincompletedisclosurelimitstheprecisionofanalysis,the
conclusionisunequivocal:decarbonizingportfolioholdingsproducedabetterfinancialoutcomeinevery
casebutone,"saidCorporateKnightschiefexecutive,TobyHeaps.“Ithelpsexplainwhyagrowing
groupofinvestors5arevotingwiththeirdollarsforlesspollutionandmoreenvironmentalsolutions.”
Somefundswerefoundtohavesubstantiallyhigherexposuretocarbonheavycompanies,whileothers
havequietlyreduced,orinsomecasescompletelyeliminated,theirmajorholdingsexposuretothe
mostcarbon-intensivecompaniesandasaresultavoidedsignificantfinanciallosses.Thiscomesonthe
heelsoftworeports:onefromOxfordUniversitywhichidentifiedthefossilfueldivestmentmovement
asthefastestgrowingdivestmentmovementinhistoryandwrotethat“inalmosteverydivestment
campaign(...)fromadultservicestoDarfur,tobaccotoApartheid,divestmentcampaignswereeffective
inlobbyingforrestrictinglegislationaffectingstigmatizedfirms”.AndanotherbyArabellaAdvisors,
whichfoundthatthemovementtodivestfromfossilfuelsandinvestinrenewableenergyandclimate
solutionsgrew50-foldinonlyoneyear,topping$2.6trillioninassetsundermanagementbyinstitutions
andindividualscommittedtodivestment.
“Majorfundshaveconsistentlyoutperformedmajorindicesinthelastthreeyears,through
decarbonizingtheirportfolios.Ourwidecoveragewithover40,000consideredcompaniesandour
methodologywithover800approximationmodelsguaranteestheaccuracyandpertinenceoftheClean
CapitalistDecarbonizer.Weareexcitedtobepartofthisinitiative,”saysMaximilianHorster,Director
FinancialServicesatSouthPoleGroup.
Theperiodofanalysiscoincideswithatoughmarketforoilandcommodityprices,anditispossiblethat
overthenextfewyears,someoilstocksandevencoalutilitiescouldpartiallyrecover;however,when
consideringthelong-term,itisclearthatthereisatenuousbusinesscaseforremainingheavilyinvested
incarbonintensiveindustries,asoutlinedbytheGovernoroftheBankofEnglandMarkCarney.In
failingtodivest,institutionsriskunder-exposureto$3trillionofpublicequitiespositionedtobenefit
fromamoreresourceefficientandexpandinglowcarboneconomy.
“Theimpactofclimatechangewillbeamajorinvestmentthemeinthenextdecadeandinvestorswho
areattheforefrontofaddressingrisks,suchasstrandedassetsintheirportfolioconstructionand
securityselectionprocess,shouldbethebeneficiariesofstrongerlong-termriskadjustedperformance,”
saidChristopherIto,ChiefExecutiveOfficerofFossilFreeIndexes.“WearepleasedthattheCarbon
Underground200TMhasbecomeastandardtoolforinvestorsastheyevaluatetheirexposuretoreserve
owningcompanies.HistoricalresultssuchasthoseindicatedbytheCleanCapitalistDecarbonizerbegin
tohelpshapethenarrative,butgoingforward,theimpactofclimatechangeandfuturecarbonpricing
willlikelyhaveamorepronouncedimpactespeciallyonthosereserveowningcompanieswhosebusiness
modelsandstrategiesarenotconsistentwiththemovetowardalowcarboneconomy.”
Whilethisanalysisfocusedonthepastthreeyears,datingtothelaunchofthefossilfueldivestment
movement,otheranalysesoveratenyearperiodbyMSCIandFossilFreeIndexesalsofoundfossilfree
portfoliosoutperformed.
“TheDecarbonizerwillprovideadeeperleveloftransparencyinthediscoursearoundtheinvestmentsof
someoftheworld’smostprominentinstitutions,”saidBrettFleishman,SeniorAnalystat350.org.“The
successofthedivestmentcampaignisevidencethatthetideisbeginningtoturnagainstfossilfuels.
WhenthetooldisclosedthattheUniversityofTorontocouldhavegeneratedanexcessreturn--big
enoughtohavepaidfulltuitionfortheentirestudentbodyforallfouryears--iftheyhaddivestedfrom
fossilfuelswhenthecampaignstarted,theconversationbecamegroundedinthestoryoftheinstitution
itself.Divestmentisthemoral,prudent,andsmartthingtodo.”
###
NotesforEditors:
1
14Fundsanalyzed
EstimatedCostofnot
decarbonizing3years
ago6
Fund
SizeoffundinUSD
AlgemeenBurgerlijkPensioenfonds(ABP):"DutchCivil
ServantsPensionFund")
$382,344,000,000
$9,366,211,873
7
AustralianNationalUniversityEndowment $686,980,602
$53,850,841
CanadaPensionPlanInvestmentBoard
$199,825,920,000
$7,025,528,323
FutureFund(Australia)
$83,152,631,000
$1,546,602,354
Bill&MelindaGatesFoundationTrustEndowment
$40,564,000,000
$1,897,962,806
HarvardUniversityEndowment(HarvardManagement
Company)
$37,600,000,000
-$206,290,9768
LondonSchoolofEconomicsEndowment
$147,939,674
$3,062,919
7
McGillUniversityEndowment(McGillInvestmentPool) $990,520,320
$32,330,177
7
NewYorkCityEmployeeRetirementSystem(NYCERS) $54,451,000,000
$1,618,154,962
OntarioMunicipalEmployeesRetirementSystem
(OMERS)7
$54,374,400,000
$756,153,815
OntarioTeachers'PensionPlan(OTPP)
$115,081,907,200
0
UniversityofTorontoAssetManagementCorporation
$5,588,480,000
$419,418,629
VermontPensionInvestmentCommittee
$4,020,000,000
$79,387,949
WellcomeTrust
$27,448,424,600
$352,680,885
Total
$1,006,276,203,396
$22,945,054,557
AboutCorporateKnights:CorporateKnightspublishestheaward-winningbusinessandsociety
magazineCorporateKnights,andproducescorporaterankings,researchreportsandfinancialproduct
ratingsbasedoncorporatesustainabilityperformance.Itsbest-knownrankingsincludetheBest50
CorporateCitizensinCanada,andtheGlobal100MostSustainableCorporations.CorporateKnights
researchalsopowerstheNewsweekGreenRankings.
AbouttheCleanCapitalistDecarbonizer:CreatedbyCorporateKnightsandpoweredbycarbondata
fromSouthPoleGroup,theCleanCapitalistDecarbonizerisafreeinteractivetoolthatshowsthe
financialimplicationsofdivestinghighcarboncompaniesinfavourofthosethatderiveatleast20%of
theirrevenuesfromenvironmentalmarketsornewenergy.TheCleanCapitalistdatabasecovers7,000
securities(comprisingmorethan85%ofglobalmarketcapitalization),includingallprimarypublicequity
securitieswithamarketcapover$2billionand/orlistedonmajornationalandglobalindices.A
professionalversionoftheCleanCapitalisttoolfortheinvestmentcommunitywillbelaunchedatthe
upcomingParisClimateConference.
AboutSouthPoleGroup:Zurich-basedSouthPoleGroupbeganasaproject-drivencompanyfocusedon
developingandsellinghigh-qualitycarboncredits.Today,itistheworld'sleadingproviderofclimate
solutions.Nootherfirmintheworldhasdevelopedasmanysuccessfulemissionreductionprojects.No
othercompanyoffersasrichasuiteofservicesandsolutions.SouthPoleGrouphelpspublicandprivate
sectororganisationsdevelopclimateprovenpoliciesandstrategies.Areasofexpertisecovereverykey
sustainability-relatedareaofclimatechange,includingbutnotlimitedto:forests&landuse,water,
sustainablecities&buildings,aswellasrenewableenergyandenergyefficiency.Formoreinformation,
visitwww.thesouthpolegroup.comorfollowthecompany@southpolegroup.
NadiaKähkönen,CommunicationsManager,SouthPoleGroup
Ph:+6626788977,email:[email protected]
2
TheCarbonUnderground200,originallypioneeredbyCarbonTracker,wasprovidedbyFossilFree
Indexes,andconsistsofthetop100publiccoalcompaniesgloballyandthetop100publicoilandgas
companiesglobally,rankedbythepotentialcarbonemissionscontentoftheirreportedreserves.
3
Thelistofutilitieswhichgeneratemorethan30percentofelectricityfromcoalwasprovidedbySouth
PoleGroup.
4
Companiesprovidingenvironmentalsolutionsderiveatleast20%oftheirrevenuesfrom
environmentalmarketsornewenergyasverifiedbyFTSEEnvironmentalMarketsorBloombergNew
EnergyFinance.Thecollectivemarketcapitalizationofthecompaniesprovidingenvironmentalsolutions
totalled$3trillionasofSeptember30,2015.
5
Someexamplesofinvestorsleadingtheway:PFZW,the$183billionDutchpensionfundhaspledged
tohalveitscarbonfootprintby2020whileincreasingitsinvestmentsinclimatesolutionsfourfold.AXA,
theFrenchinsurerwith$1.6trillioninassetsundermanagement,issellingoffitsstakesinmining
companiesandelectricutilitiesderivingover50%oftheirturnoverfromcoal,whiletriplingitsgreen
investments.ItisalsonotablethattheFrenchgovernmentrecentlyamendedlegislationtorequire
institutionalinvestorstoreporttheircarbonfootprintsaswellashowtheyarecontributingtothe
internationalgoaloflimitingclimatechange.BobLitterman,aformerheadofriskmanagementat
GoldmanSachs,isshortingcarbonforhigherreturns.TheLitterman-inspiredWWFstrandedassetstotal
returnswapislongS&P500andshort“stranded”assets.Ithasreturnedmorethan40percentforthe
WorldWideFundforNaturesinceJanuary2014.23investorsignatoriestotheMontrealCarbonPledge
andPortfolioDecarbonizationCoalitionwithassetstotalling$1.2trillionhavepledgedtoreducetheir
portfoliocarbonfootprintsbyasmuchas50%-80%withoutsacrificingfinancialreturns,includingthe
SwedishpensionfundAP4andFrenchpensionfundsERAFPandFRR.
6
Basedonthedifferenceofinvestingtheestimatedvalueofafund’spublicequitiesholdings(onSept
30,2012)intwosimulatedportfolios(CleanandUncleaned),rebalancedquarterlyoverathreeyear
timeperiodtoSeptember30,2015.Allevaluatedfundswereofferedanopportunitytoreviewthe
analysisinadvanceofitsrelease.Viewfullmethodologyhere.
7
Inthefourcaseswherethefunddidnothaveanycompaniesclassifiedasenvironmentalsolution
providers,freefloatmarketcapitalizationweightingwasused.
8
Moneydivestedfromcarbonintensivecompanieswasshiftedintocompaniesprovidingenvironmental
solutionsalreadyexistingintheinvestor’sportfolio.InHarvard’scasetheyhadjustonesuchcompany,a
sustainablefood,feedandfuelingredientsfirmcalledDarlingIngredients,whichperformedpoorlyon
thestockmarketoverthepastthreeyears.