Greener pensions, greater returns: the case for fossil fuel divestment

Published on February 24, 2025

In this week’s Corporate Knights Drill-Down, we highlight 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 Mackenzie Corporate Knights Global 100 Index ETF not only aligns with sustainability goals but can also deliver stronger financial returns.

The findings are clearly shown in the chart above: the additional total returns from divestment were strongly correlated with the proportion of fossil fuel holdings in each fund’s portfolio. The data indicates a strong positive linear correlation, with a coefficient of 0.79, between reduced fossil fuel holdings and improved returns.

Over the ten-year period from 2013 to 2023, all nine funds analyzed saw increased total returns. Had a divestment and reinvestment strategy been implemented at the start of the period, total returns would have increased by an average of 10.3%, equating to an additional US$4.6 billion in assets. This is all the more surprising it 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 but a promising strategic asset allocation approach. Not only is it sustainable—it’s profitable.

To learn more about sustainable research projects conducted by Corporate Knights, please reach out to [email protected]

The post Greener pensions, greater returns: the case for fossil fuel divestment appeared first on Corporate Knights.

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