The performance of companies scoring favorably in the Corporate Knights Sustainable Economy database makes a compelling financial case for divesting from fossil fuels. Our analysis of nine public pension funds across the world reveals that shifting investments away from fossil fuels and reinvesting these amounts into the Corporate Knights Global 100 Index not only aligns with sustainability goals but can also deliver stronger financial returns.
The chart above clearly shows these findings: the additional total returns from divestment were strongly correlated with the proportion of fossil fuel holdings in each fund’s portfolio. The data indicate a strong positive linear correlation, with a coefficient of 0.79, between reduced fossil fuel holdings and improved returns.
Over the 10-year period from 2013 to 2023, all nine funds analyzed saw increased total returns. Implementing a divestment and reinvestment strategy at the start of the period would have increased total returns by an average of 10.3%, equating to an additional US$4.6 billion in assets. It is all the more surprising that this occurred during a period when oil and gas stocks enjoyed a bull run following the invasion of Ukraine in 2022.
This is why divesting from fossil fuels is more than just an ethical choice; it’s a promising strategic asset-allocation approach. Not only is it sustainable – it’s profitable.
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