Pensions, endowments have lost billions by refusing to divest: report

By Maura Forrest

November 19, 2015

A new report is putting paid to the notion that fossil-fuel divestment is a nice idea, but a financially foolish choice.

The analysis from Corporate Knights, a Toronto-based research company focused on sustainability, looked at 14 major funds with a total of $1 trillion in assets. It found that those funds have sacrificed over $22 billion by not shifting away from fossil fuels in 2012.

The 14 funds included several in Canada. Among them are the Canada Pension Plan, which reportedly lost out on $7 billion, the Ontario Municipal Employees Retirement System, which sacrificed $756 million, and the McGill University Endowment, which gave up $32 million.

The results partly reflect the global slump in oil prices. But they also suggest that the clean energy economy is growing stronger and becoming a wiser investment.

“Contrary to the conventional wisdom, divesting out of fossil fuels in favour of clean energy has been a huge money-maker,” Corporate Knights co-founder Toby Heaps wrote in an overview of the analysis.

The study used 2012 as a baseline, arguing that was the year the divestment movement took off. The analysis was performed by removing the companies with the largest coal and oil reserves from a fund’s holdings. Those investments were then redirected to companies already in the portfolio that earned at least 20 per cent of their revenue from new energy or environmental markets.

Only one of the Canadian funds analysed, the Ontario Teachers’ Pension Plan, apparently hasn’t missed out on any potential returns. According to the report, that’s because it’s a “savvy investor” and “held no large coal or oil companies in its disclosed major holdings, in contrast to all the other Canadian funds.”

Corporate Knights is recommending that people use a tool it has created to estimate how much their college or institution might have gained by divesting from fossil fuels.

In Canada, at least 30 universities have active divestment campaigns, though none has yet agreed to fully eliminate its investments in coal and oil.

However, the United Church of Canada and the Canadian Medical Association have both recently announced they will divest their holdings in the fossil-fuel industry.




Photo Credit: Gord McKenna