Australia’s sovereign wealth fund, the Future Fund, has “missed out” on US$1.5 billion (AU$2.2 billion) over the past three years by not divesting from carbon-exposed companies.
According to the Clean Capitalist Decarbonizer tool, launched by Corporate Knights, together with 350.org using carbon data from the South Pole Group, the fund could have grown its revenue by US$1.5 billion by divesting from carbon-intensive companies and investing in companies that provide “environmental solutions”.
The finding was reached after Corporate Knights analysed the most-recently disclosed holdings of the Future Fund (as well as 13 other prominent funds, including the Australian National University), and estimated the potential financial impact of shifting their investments from “the world’s largest fossil fuel companies” (and utilities that rely on coal for more than 30 per cent of their electricity generation), to companies that derive at least 20 per cent of their revenues from environmental markets of new energy.
From there, the total returns over a three-year period (thought to be “the beginning of the global fossil fuel divestment campaign”), starting on 1 October 2012, were calculated.
According to the tool, the collective market capitalisation of the companies providing environmental solutions totalled US$3 trillion (AU$4.2 trillion) as of 30 September 2015.
It added that carbon-intensive investments of the 14 funds cost investors $22 billion (AU$31 billion) in reduced returns.
“The funds analysed could have saved billions of dollars had they divested from fossil fuels when the divestment campaign started three years ago,” 350.org Australia campaigns director Charlie Wood said.
“Perhaps investors like Future Fund Chairman Peter Costello will wax less lyrical in his opposition to fossil fuel divestment when he sees how much money his AU$117 billion fund has forgone by remaining invested in fossil fuels.”
Ms Wood noted that, in comparison to the Future Fund, the Australian National University Endowment Fund, which divested last year, had much lower losses – approximately US$53 million ($AU75 million) dollars.
“Whilst Tony Abbott and his friends in the coal industry were busy attacking the Australian National University for divesting last year, these results show that the university was actually pursuing a financially- and environmentally-responsible course of action,” she said.
Corporate Knights chief executive Toby Heaps added: “[Our] analysis of 14 major funds with a total US$1 trillion in assets, based on available data, showed that carbon-intensive investments may have cost investors US$22 billion in reduced returns.
“While incomplete disclosure limits the precision of analysis, the conclusion is unequivocal: decarbonising portfolio holdings produced a better financial outcome in every case but one.
“It helps explain why a growing group of investors are voting with their dollars for less pollution and more environmental solutions.”