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Divesting From Fossil Fuels Would Have Saved U.S. Pension Funds $21 Billion

Some of the biggest U.S. pension funds would be now $21 billion richer if they had divested from fossil fuels a decade ago, a new study by the University of Waterloo in partnership with environmental organization Stand.earth has shown.

The study analyzed the 2013-2022 performance of eight U.S. pension funds, including California Public Employees' Retirement System, California State Teachers' Retirement System, and the New York State Teachers' Retirement System. Researchers found that the cumulative value of the public company equity portfolio of pension funds would have been 13 percentage points higher on average if the funds had been divested from the energy sector ten years ago.

For six of the funds analyzed using data obtained from the Bloomberg databases, the total value of the ex-energy portfolios would have been $424.6 billion, while the total value of the reference portfolios was $402.8 billion, the study has found.

The difference in value is more than $20 billion, according to the research.

“Overall, we could demonstrate that energy divestment makes sense from a financial, climate exposure, and climate impact perspective,” the authors of the study wrote.

Amy Gray, senior climate finance strategist at Stand.earth, said in a statement,

“If climate chaos like fires and floods weren't enough, this latest report strengthens the case even further that public pension funds must divest from fossil fuels as part of meeting their fiduciary duties.”

ESG investing has gained momentum in recent years, with New York leading the pack of divesting from fossil fuels.  

In April, New York City Comptroller Brad Lander unveiled a plan for a “Net Zero Investment Portfolio By 2040” which includes actions by the NYC pension funds to “divest to reduce risk, building on the funds’ historic divestment of fossil fuel reserve owners in public equities by asking all private markets managers to exclude upstream fossil fuel investments.”

But states with large fossil fuel industries such as Texas, West Virginia, Louisiana, Montana, and Oklahoma are blacklisting funds managed by the world’s biggest asset manager BlackRock and other major banks and financial institutions, which, the states say, show that those financial firms are boycotting the oil and gas industry. 

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By Tsvetana Paraskova for Oilprice.com

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