Divesting from fossil fuels doesn’t mean sacrificing returns: report

Institutional investors that divested from fossil fuels in the past five years didn’t do so at the expense of returns, according to new data by Genus Capital Management Inc.

The firm’s 2018 divestment report, which looked at the returns gained by its Fossil Free CanGlobe equity fund, showed it beat its own benchmark and the Canadian stock market between May 2013 and July 2018. On an annualized basis, the fund posted an annualized return of 14.9 per cent, while the benchmark returned 12.9 per cent.

Read: Should institutional investors divest from carbon?

“The data from our fossil free funds has been consistent with each year, but what’s remarkable about the 2018 divestment report are the results of our backtests,” said Mike Thiessen, manager of sustainable research at Genus, in a press release. ”The tests show divesting as far back as 1998 would have yielded financial returns for investors, and with the advancements being made in more climate-friendly sectors like materials, consumer staples and telecom, we can only expect to see the return potential for divested portfolios grow.”

The fund’s strategy also aimed to replace the exposure to energy stocks with other, similarly economically sensitive sectors, in order to mimic its price exposure. This necessitated reaching beyond Canadian public equities, 30 per cent of which aren’t suitable for the fund due to their exposure to fossil fuels in one form or another, according to Genus.

“We launched our fossil free suite of funds believing it was possible to generate strong returns without contributing to climate change,” said Wayne Wachell, chief executive officer and chief investment officer of Genus, in the release. “With each year, the data has supported that assertion. At the five-year mark, we can conclusively say: divesting from fossil fuels pays.”

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