Our statement stated that the fact that fossil fuel companies have shown no willingness to acknowledge or address this scenario “puts their core business models on a collision course with the urgent need to reverse the upward trend in global carbon emissions. Investing in fossil fuel companies amounts to a vote of confidence in this strategy, when our society’s investments and public policies must do everything possible to send the very opposite message.”

The Clean Yield submission also took on the frequently held misbelief that fossil fuel divestment would inevitably mean sacrificing return by narrowing the universe of investable equities. It cites a study conducted by the Aperio Group finding that divesting of the world’s largest gas, oil and coal producers posed little risk of additional volatility or increased tracking error, imposed minimal costs, and introduced a minimal return penalty of less than 1/100 of 1%. 

Divesting from fossil fuels will reduce exposure to stranded assets whose value is at high risk in a world that increasingly is recognizing and acting upon the reality that most fossil fuel reserves cannot be burned. It will provide encouragement to other large institutional investors considering paths to divestment, while signalling policy makers that the time for action is now. It will relieve Massachusetts of the ethical cognitive dissonance that results from investing in energy sources that perilously undermine our ecological support systems. And this action can be taken without radically altering performance expectations.

Clean Yield’s testimony can be found here.