Virtually every influential stakeholder in the UK, from universities to councils and religious institutions, have been pressured to consider their positions on whether to divest of fossil fuel-related investments. Proponents say that divestment can “stigmatise” the oil and gas industry in the global debate over climate change, all while costing institutions that adopt these policies almost nothing.
Following the release of the groundbreaking study by Prof Daniel Fischel of the University of Chicago in the US, economic consultancy Europe Economics has looked at how divestment strategies could affect UK investors.
The main finding?
The research found that investors following a fossil fuel divestment strategy, from 2002 to mid-2015, would have sacrificed the equivalent of an annual return of 0.68 percentage points (or 68 basis points), or if they did not want to accept lower returns, would have had to take more than 20 per cent extra risk on their investments.
To put the options for investors into perspective, if someone had £100,000 invested in a pension pot tracking the stock market from 2002 they would have had about £280,000 in 2014. If, instead, they had excluded fossil fuels in 2002 then by 2014 they would have had only £260,000 – a loss of more than 7 per cent over the period.
The bottom line: UK citizens and institutions alike lose out by following an ill-guided fossil fuel divestment strategy – affecting everything from pension funds to endowments. Check out the full report and fact sheet from Europe Economics, and visit the What They’re Saying page for more information on why institutions and thought leaders are saying no to this flawed campaign.