Key Takeaways
- • BlackRock and Meketa, two investment advisors, separately concluded in draft reports that pension funds divesting from fossil fuels experienced no negative financial impact and, in some cases, modest improvements in fund returns, according to IEEFA.
- • The research was commissioned by New York City's comptroller to advise three city pension systems: the New York City Employees' Retirement System, the Teachers' Retirement System, and the Board of Education Retirement System.
- • Each firm produced three draft reports covering an asset owner survey, fossil fuel company risk and transition readiness standards, and divestment options with portfolio performance assessment.
- • IEEFA characterized the reports as practical fiduciary guidance rather than either pro- or anti-fossil fuel advocacy, and said the prudence and due diligence standards provide clear direction for divestment decisions.
- • Fossil fuel stocks have underperformed over the last five years, and forward-looking analysis shows significant regulatory, technological, and market risks for the sector, according to the draft findings.
Summary
BlackRock and Meketa have separately concluded that investment funds divesting from fossil fuels have experienced no negative financial impacts and, in some cases, modest improvements in returns, according to draft reports cited by the Institute for Energy Economics and Financial Analysis (IEEFA). The reports were produced under contract to advise on the divestment plans of three New York City pension systems: the New York City Employees' Retirement System (NYCEDRS), the Teachers' Retirement System (TRS), and the Board of Education Retirement System (BERS). The city's comptroller had requested the work, and the systems had set divestment goals but sought guidance on implementing an orderly process.
Each firm produced three draft reports. The first surveyed asset owners that divested and those that did not. The second analyzed the financial, environmental, and climate risks faced by fossil fuel companies and set standards for transition readiness. The third assessed divestment options and portfolio performance. According to the findings summarized by IEEFA, divestment by hundreds of funds worldwide has passed fiduciary prudence tests, and fossil fuel stocks have underperformed over the last five years.
The research found no uniform divestment model. Some funds divested only from coal, while most adopted broader strategies across coal, oil, and gas, and all options examined were described as financially sound. The reports also address fiduciary obligations, costs, post-divestment performance assessment, climate action plans, and renewable energy investment. A recurring theme is that adopting sustainable investment standards has generally been rewarded rather than penalized by the market.
IEEFA, whose director of financial analysis Tom Sanzillo wrote the commentary, argued that the reports' credibility stems from the advisors' standing, as BlackRock is a major global asset manager and Meketa is a mid-sized advisor, and that neither study is easily dismissed as partisan. The source notes the global trend toward public pension divestment is growing, with individual funds divesting now representing larger pools of capital than before. Note that the full source article could not be retrieved, so this summary relies on the publisher's excerpt and related coverage.
Each firm produced three draft reports. The first surveyed asset owners that divested and those that did not. The second analyzed the financial, environmental, and climate risks faced by fossil fuel companies and set standards for transition readiness. The third assessed divestment options and portfolio performance. According to the findings summarized by IEEFA, divestment by hundreds of funds worldwide has passed fiduciary prudence tests, and fossil fuel stocks have underperformed over the last five years.
The research found no uniform divestment model. Some funds divested only from coal, while most adopted broader strategies across coal, oil, and gas, and all options examined were described as financially sound. The reports also address fiduciary obligations, costs, post-divestment performance assessment, climate action plans, and renewable energy investment. A recurring theme is that adopting sustainable investment standards has generally been rewarded rather than penalized by the market.
IEEFA, whose director of financial analysis Tom Sanzillo wrote the commentary, argued that the reports' credibility stems from the advisors' standing, as BlackRock is a major global asset manager and Meketa is a mid-sized advisor, and that neither study is easily dismissed as partisan. The source notes the global trend toward public pension divestment is growing, with individual funds divesting now representing larger pools of capital than before. Note that the full source article could not be retrieved, so this summary relies on the publisher's excerpt and related coverage.
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