Fourteen of the world’s largest pension funds have lost C$22 billion over the last three years by failing to shift their investments out of coal, oil, and gas, Corporate Knights concludes in a study released earlier this week.
“Over $22 billion had been sacrificed as a result of not shifting out of fossil fuels into clean energy stocks three years ago,” said Corporate Knights founder Toby Heaps. “Contrary to the conventional wisdom, divesting out of fossil fuels in favour of clean energy has been a huge money-maker.”
The 14 funds, with assets of more than C$1 trillion, include the Canada Pension Plan, the Ontario Teachers’ Pension Plan, and the Ontario Municipal Employees Retirement System (OMERS).
“Oil and coal prices may recover somewhat over the next several years, but make no mistake,” Heaps said. “The global economic shift away from declining fossil fuel industries toward the rising clean energy economy is already under way.” That means “investors who fail to grasp this reality will do significant financial harm to the people who have entrusted them with their savings.”
The report “chose 2012 as its baseline year because that was when the movement to ‘decarbonize’ the investment world began to gather steam in the broader investment community,” CBC reports. “It’s an interesting time period also because, while the energy sector has seen large investment losses in the previous 18 months, the selected time frame also includes large run-ups in oil and gas prices that would have driven investment returns higher.”
While the CPP has “sacrificed” more than $7 billion in revenue and OMERS has foregone $756 million, the teachers’ fund was better off “because it has already quietly decarbonized its portfolio.”
Corporate Knights “crunched the numbers on what would have happened if the funds had taken the funds they had invested in those companies, and put them toward buying more shares in green energy companies in which they already owned stakes,” CBC notes. “The results seem to pour cold water on the notion that investing in renewable energy will necessarily reduce investment returns.”