EU’s Biggest Pension Fund to Dump $17 Billion in Fossil Fuels

(Bloomberg) -- Europe’s biggest pension fund, ABP of the Netherlands, has joined a growing number of investment managers blacklisting fossil fuels as the finance industry gives in to pressure from activists and customers alarmed at the prospect of a climate catastrophe caused by carbon emissions. 

ABP said Tuesday it will divest 15 billion euros ($17.4 billion) worth of fossil-fuel assets by early 2023. The fund said it doesn’t expect the decision to hurt long-term returns and added that the move will allow it to unveil a more ambitious CO2 reduction goal next year. The announcement underpins the speed with which the investment industry is turning its back on oil, gas and coal, with 1,500 asset managers overseeing a combined $39.2 trillion now committed to offloading such holdings, DivestInvest said in a separate release.

The development marks a huge shift over the past seven years. Back in 2014, when DivestInvest first tallied such commitments, funds turning their backs on fossil fuels represented just $52 billion. So far in 2021, the $16 billion Ford Foundation, started by the son of Henry Ford and now ranked among the world’s largest private foundations, said it will cease to invest in fossil fuels. Harvard University’s $42 billion endowment made a similar pledge and Maine became the first U.S. state to order its public pension fund to sell off fossil-fuel holdings.

New York City’s pension funds have announced plans to divest about $4 billion worth of fossil fuel-related investments and Canada’s second-largest pension manager, Caisse de Depot et Placement du Quebec, has said it will sell billions of dollars worth of oil assets, including large equity stakes in Canada’s top crude producers, as part of a new strategy that aims to dramatically cut the emissions from its investments. Fidelity International unveiled plans Tuesday to halve the carbon footprint of its investment portfolio by 2030.

“The fossil-fuel divestment movement is growing at an accelerated clip, because the world has realized where the money flows determines our success in slowing climate change,” said Richard Brooks, climate finance director at environmental nonprofit Stand.earth. “More money simply needs to get out of financially risky coal, oil and gas companies, and switched over to companies driving climate solutions, including renewables.”

Dumping fossil fuels is a quick win for funds wishing to decarbonize portfolios, yet whether it also produces a positive outcome for the climate is fiercely debated.  Simply selling fossil-fuel stocks doesn’t change the demand or use of fossil fuels, and in fact can lead to carbon-intensive companies being held predominantly in portfolios of investors that are less motivated to push for lower emissions.

Still, authors of the DivestInvest report said the movement can now “offer solid proof that divestment is a sound financial strategy” and that “fossil fuels are a bad bet financially.” Early adopters of divestment strategies are reporting positive financial results and more institutions “cite the financial reality that climate change will make fossil fuels obsolete and a renewable energy future inevitable,” according to the report.

That chimes with the findings of a BlackRock Inc. report commissioned by New York City that said “no investors found significant negative performance from divestment, but rather have reported neutral to positive results.”

©2021 Bloomberg L.P.