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The financial impact of fossil fuel divestment

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Plantinga_2020_CP_Financialimpact_CC.pdf (1.543Mb)
Date
17/08/2020
Author
Plantinga, Auke
Scholtens, Bert
Keywords
Divestment
Fossil fuel
Energy system transition scenarios
Stock market
Investors
Climate change
HG Finance
HD Industries. Land use. Labor
DAS
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Abstract
The fossil fuel divestment movement tries to increase awareness about the need for climate action and heralds divestment from fossil fuel producers as a means to combat climate change. Financial investors are increasingly showing interest in the non-financial impact of companies they invest in, i.e. responsible investing. However, they also want to be assured of sufficient returns and limited risks to support the living costs of their ultimate beneficiaries. In this context, we investigate the impact of divestment and the transition of the energy system on investment performance. We rely on an international sample of almost seven thousand companies and study a period of forty years. Further, we investigate scenarios with very different pathways to the transition of the energy system. We find that the investment performance of portfolios that exclude fossil fuel production companies does not significantly differ in terms of risk and return from unrestricted portfolios. This finding holds even under market conditions that would benefit the fossil fuel industry. We conclude that divesting from fossil fuel production does not result in financial harm to investors, even when fossil fuels continue to play a dominant role in the energy mix for some time.
Citation
Plantinga , A & Scholtens , B 2020 , ' The financial impact of fossil fuel divestment ' , Climate Policy , vol. Latest Articles . https://doi.org/10.1080/14693062.2020.1806020
Publication
Climate Policy
Status
Peer reviewed
DOI
https://doi.org/10.1080/14693062.2020.1806020
ISSN
1469-3062
Type
Journal article
Rights
Copyright © 2020 The Author(s). Published by Informa UK Limited, trading as Taylor & Francis Group. This is an Open Access article distributed under the terms of the Creative Commons Attribution-NonCommercial-NoDerivatives License (http://creativecommons.org/licenses/by-nc-nd/4.0/), which permits non-commercial re-use, distribution, and reproduction in any medium, provided the original work is properly cited, and is not altered, transformed, or built upon in any way.
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  • University of St Andrews Research
URI
http://hdl.handle.net/10023/20513

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