Fossil fuels added nothing to investment returns over past 40 years

Credible new evidence has surfaced that there’s no financial penalty for investing Fossil Free.

In a just-released white paper, Dimensional Fund Advisors finds that since 1975 the exclusion of all energy and utilities companies* from an equity market index portfolio did not have any material impact on average returns or volatility.

The same is true in developed markets outside of the US (since 1990) and emerging markets (since 1995).

What does this mean?

Since there’s no reason to believe the next 40 years will be better than the past 40 years for fossil fuel investments, there’s no longer even a financial justification for holding Exxon Mobil and other major contributors to global warming in your investment portfolio. As climate change effects intensify, downside risks of such carbon-intensive assets may even escalate.
 

Read Full Report
 

Dimensional’s report is a bit technical but worth reading. (You can read our non-technical synopsis here.)

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* Energy and utilities companies are where the largest potential or actual emissions of climate-warming greenhouse gases tend to be concentrated. Macroclimate overweights the most sustainable companies in these sectors — and excludes the rest.
 

Macroclimate now “Deforestation Free”

Palm oil production is the fastest growing cause of rainforest destruction and rainforest destruction is the second biggest driver of climate change after the burning of fossil fuels. That’s why we’ve worked with Friends of the Earth and Dimensional Fund Advisors to make it easy for everyday investors like you to eliminate these major climate stressors from your investment portfolio.

Read the full story — including the role Macroclimate® played in pushing palm oil divestment into the mainstream.

 
Full Story

 

Photo credit: Hayden

Post-Election Surprise

Given the electoral shock of November 8th, environmentally-responsible investors and climate activists are asking:

How Will Fossil Free Sustainability Investment Strategies Perform Under Trump?

Last week’s post-election stock market returns offer an early indicator of how the financial markets are adjusting to the new reality. The core holding of our Macroclimate Ultra Low Carbon Global Equity Portfolio – DFA US Sustainability Portfolio (DFSIX) – was remarkably resilient. It outperformed both the unfiltered (fossil-fuel-heavy) version of the same fund (DFEOX) and the S&P 500 (also unfiltered). All three are positive. See chart above.

Chart below shows DFA US Sustainability Portfolio (DFSIX) outperformance versus Exxon Mobil (XOM) — the quintessential fossil fuel company — over the past five years, including post election through December 16, 2016.

 


 
Going forward, you never know which market sectors will outperform from year to year. This also applies to fossil fuel assets in the short term (1-5 years). What we do know is that financial markets reward patient, long-term investors and low-carbon energy generally has outperformed high carbon in recent years worldwide.

Whether this continues to be true during the Trump administration remains to be seen. Having said that, since there’s now little doubt we’ll face significant climate change effects in our lifetimes, reducing exposure to fossil fuels is likely to offer more upside than downside for long-term investors (those with a time horizon of 10 or more years). As climate change effects intensify, downside risks of carbon-intensive assets may escalate regardless of the political environment in the 2020s.

Learn More About Low Carbon Investing

Why – Even Under Trump – Divestment is Financially Prudent

Why Does This Matter?

Even if progress on the political front is stalled, the financial markets offer hope for climate action. Here’s why:

If investors — on a global scale — divert their capital from climate stressors to more climate-resilient alternatives, the risks of abrupt and irreversible climate change will be reduced.


Are Your Investments Overexposed to Fossil Fuels?

 

Florida If Greenland Melts

 
If the entire Greenland Ice Sheet melted, sea-level rise would be 23 feet (7 meters) – more than enough to submerge Miami, New York City, and major population centers in India and southeast China.
 

 
The good news is that, as a result of recent financial innovations, our investment choices can help reduce the risks of abrupt and irreversible climate change. Join over 50,000 investors who — on a global scale — have pledged to divert their capital from fossil fuels to more climate-resilient alternatives.

 
Image: Courtesy of Lamont-Doherty Earth Observatory of Columbia University, credited to William F. Haxby (Source: PBS Nova)

 
Get Started with Macroclimate

 

Welcome to Macroclimate!

Family businesses come with a special sense of responsibility and commitment to the long-term.

But beyond driving our commitment to exceptional service, this perspective also forms the very foundation of our investment strategy: how can we leverage the deep connections between financial markets and the physical world to do what’s best for both our clients and the planet, now and in the future?

When our family (father Mark and sons Peter and Jesse) became increasingly concerned about climate change around six years ago, we decided to do something about it. What resulted was the world’s first automated personal divestment platform, and in the process, great joy from working together as a team to build a solution that could make a meaningful difference.

Macroclimate® is a new kind of investment company: one that uses financial science, expert opinions of climate scientists, and state-of-the-art automation technology to help you invest better — in an environmentally-responsible way.

As we launch this revolutionary new platform, we’d like to share more about who we are and how we arrived at our mission to reduce climate risk through geofinancial engineering — the leveraging of financial markets to positively impact the global climate.

It started with a Vision.

Knowing we wanted to make a difference was the first step, but we quickly realized that the information we needed didn’t yet exist. With a combined skillset incorporating experimental and behavioral economics (Peter), information visualization and user experience (Jesse), and financial markets and technology (Mark), we sought out scientific answers.

Tapping into new research methodologies for gauging expert opinion on complex and uncertain issues, we created Vision Prize. For three years, in collaboration with the UK’s Institute of Physics (IOP Publishing) and researchers at Carnegie Mellon University, we worked with an expert panel of 340 climate scientists to determine the best — and most scalable — ways to help investors and others improve climate outcomes.

Their conclusion? The single most effective way for investments to reduce the risks of catastrophic climate change is to focus on eliminating coal-fired power plants.

A practical, actionable and specific solution.

The problem was that the financial tools to do that didn’t exist — and were certainly not accessible to everyday investors. But with the launch of Macroclimate®, that’s changed. We’ve developed a practical response to climate change that allows individuals to have an impact — and we don’t stop with coal.

Macroclimate® is unique in the investment world in that we’ve oriented our whole business and practice around climate and climate risk. We believe that, by accelerating the fossil fuel divestment movement, we can not only measurably improve climate outcomes; we can improve financial outcomes as well. And there are now more than $95 million in assets under management aligned with the Macroclimate® strategy.

Powered by Dimensional.

Of course, even the best technology-based investment solutions are only as good as the funds that underlie them. That’s where Dimensional comes in. Dimensional manages over $400 billion in assets, including two funds specifically formulated – with our input – to take into account climate risk and divestment. With four Nobel Laureates serving as directors and resident scientists, the Dimensional funds we use have outperformed the market by focusing on “dimensions” (or “factors”) with higher expected returns, while continuing to limit risk through diversification.

How it works.

Over the most recent five-year period, global clean energy has significantly outperformed fossil fuels. And because there is increasing pressure on the fossil fuel industry as nations move toward meeting the 2015 Paris agreement, among other factors, long-term investors are more likely to see upside than downside if they overweight low-carbon investments and avoid risky fossil fuels.

Using state-of-the-art technology — and leveraging the latest behavioral decision research — Macroclimate® is the world’s first-ever automated investment service for divestors anywhere in the US.

Macroclimate® increases your investments in those companies that are viable alternatives to the worst actors, while excluding owners of fossil fuel reserves and coal-fired power plants — the Macroclimate® 50.

Make a difference today.

We are proud to say that the nonprofit project Divest Invest Individual just called Macroclimate® one of the 5 Ways Your Personal Investments Can Help Solve Climate Change.

Getting started is easy. The first step is determining how exposed your current investment portfolio is to climate risk. Our free CarbonScan® tool lets you enter your current investment allocation, and returns a portfolio analysis that tells you how your investments stack up.

Once you complete your CarbonScan®, Macroclimate® will create the optimum climate-savvy portfolio for you — one that factors in your age, tolerance for risk, investment goals, investment time horizon, and expected cash needs.

If you’re reading this, chances are you share our family’s concerns about the future of this planet. And you’ve made up your mind to do something about it. We’re extremely proud of what we’ve created with Macroclimate®, and we look forward to helping you invest in both your own financial future as well as a better world for all of our kids and grandkids.

— Mark Kriss, Peter Kriss and Jesse Kriss


Ready to Get Started?