Investor firms' carbon footprint cost them $20 billion in profit

Divesting from fossil fuel stocks 10 years ago would have had huge impact on bottom line

Investor firms' carbon footprint cost them $20 billion in profit

Public pensions, as well as other organizations that invested in the stock market, would have their portfolios worth a few billion dollars more if they had stopped investing in fossil fuel stocks 10 years ago, as reported by Yahoo! News.

The University of Waterloo collaborated with, an environmental organization, to study six public pensions within the United States and their investments. These were the California State Teachers’ Retirement System, the California Public Employees’ Retirement System, the New York State Teachers’ Retirement System, the Alaska Permanent Fund Corporation, the Oregon Public Employees’ Retirement Fund, and the State of Wisconsin Investment Board.

According to the report, the collective portfolios of the six pensions was $402.8 billion and would have been worth $424.6 billion in 2022 if they had divested from fossil fuel stocks in 2013. Along with this would have been a 16% decrease in the pensions’ carbon footprints.

Richard Brooks, climate finance director with, emphasized the importance of such findings because these pension funds have the responsibility to provide for workers who invest their earnings in the future when their retirement begins.

Decline of fossil fuels

While fossil fuels did well in the stock market in the previous years, especially during the onset of the ongoing war in Ukraine, Brooks notes that the world is slowly transitioning away from this source of fuel.

In Canada, the fossil fuel sector’s value had been underperforming this year as the industry begins to face challenges. One such being the rise of renewable energy that decreases the global demand for oil.

Sources say that the expansion of wind and solar energy are slowly pushing coal, oil, and gas out of the power sector as it enters “new era of falling fossil generation.” It is forecasted that more than 100% of the growth in the demand for electricity will be covered by low-carbon sources by the end of 2023.

In pursuit of greener investments

While the report regarding public pension funds is targeted towards US firms, Brooks said that the findings were most likely to ring more truth for Canadian groups. This is due to how fossil fuel companies are some of the prominent Canadian companies within the stock market.

It was reported in the previous year that CIBC, the Royal Bank of Canada, and Scotiabank had increased their fossil fuel investments between 2020 and 2021. Although, there are some Canadian universities who are going the long way to take the steps to stop investing on fossil fuels.

The pursuit for greener investments is soon to be vital for large investors as federal environmental, social, and governance (ESG) laws demand for some companies to disclose the risks of their operations to the climate, beginning in 2024.