Fossil fuel-free fund challenges perceptions about divestment with 16% annualized return

Carbon divestment doesn’t have to mean sacrificing investment returns, a Canadian asset manager is arguing. 

On Monday, Genus Capital Management Inc. released a report on the four-year performance of its fossil-free Canadian and global equity fund. The results show from the end showed that from May 2013 to the end of last year, the fund saw returns of 16 per cent annually. That compares to the 13.3 per cent annual return reported by its benchmark over the period.

Read: Should institutional investors divest from carbon?

“Perception has long been that including fossil fuel stocks in a portfolio was necessary to generate returns, even for investors concerned about climate change,” said Wayne Wachell, chief executive officer and chief investment officer of Genus Capital. “We now have conclusive data to demonstrate that isn’t the case.”

While Canada’s markets are heavy on energy stocks, the fund combines Canadian and global equities with a focus on particular sectors, including information technology, the financial industry, telecommunications. It also includes companies focused on discretionary consumer goods. The company touts reinvestment in cleaner and more efficient energy alternatives, along with active stock selection.

Read: Fewer Canadian pension funds lagging behind on climate change, study finds

“We have found that optimized portfolios without exposure to companies involved in extracting, refining or transporting fossil fuels can do better than those with investments in energy companies that create carbon pollution,” the company said in its report. “The often-presumed assumption of a return penalty is not consistently borne out by our research.”