Several public pension funds under pressure to divest from fossil fuel investments would have had as much as $21 billion more over the last decade without them, according to a study by the University of Waterloo released Wednesday by advocacy group Stand.Earth.
In the report, The Impact of Energy Investments on the Financial Value and the Emissions of Pension Funds, researchers at the university's School of Environment, Enterprise and Development (SEED) used Bloomberg data to analyze six large pension funds' financial performance between 2013 and 2022 based on public equity investment holdings, weights, and valuation information as disclosed in March 2023. They plotted scenarios with and without the fossil fuel holdings.
The pension funds are the $309.3 billion California State Teachers' Retirement System, West Sacramento; the $458.9 billion California Public Employees' Retirement System, Sacramento; the $133.7 billion New York State Teachers' Retirement System, Albany; the $82 billion Alaska Permanent Fund Corp., Juneau; the $93.3 billion Oregon Public Employees Retirement Fund, Salem; and the State of Wisconsin Investment Board, Madison, which manages the $126.8 billion Wisconsin Retirement System.
SEED researchers found that the cumulative value of the six pension funds' public equity portfolios would have been 13 percentage points higher on average if they had divested from the energy sector 10 years ago. The difference of nearly $21 billion comes from the total value of the ex-energy portfolios that would have been $424.6 billion compared to the reference portfolios' value of $402.8 billion.
The report also found that the carbon footprint of the original portfolios is 16.6% higher than the ex-energy portfolios, a difference of 279 million metric tons, equivalent to the energy use of 35 million homes per year.
"Overall, we could demonstrate that energy divestment makes sense from a financial, climate exposure, and climate impact perspective," the report's introduction said.
A spokeswoman for Stand.Earth said the report will be sent to politicians and decision makers in the pension funds' states. The report "puts wind in the sails of some of the divestment fights," she said in an interview.