Fossil free index outperforms the S&P 500


Investing in clean energy is paying off and there are numbers to prove it. A stock market index excluding top fossil fuel companies outperformed the S&P 500 by 1.5% last year. The index, known as FFIUS, is identical to the S&P 500, but has screened to avoid shares in the world’s largest coal, oil, and gas companies, including Peabody Energy, ExxonMobil, and ConocoPhillips. With oil prices performing wildly and leading analysts warning that fossil fuel companies are a risky long-term investment the market based argument for fossil free investing is sound. The performance of FFIUS also shows that pension funds and university endowments can benefit from joining the huge and still-growing divestment movement, which aims to discourage investment the fossil fuel companies that are contributing to climate change.


RT @billmckibben: Fossil free indexes handily outperformed the S&P last year. Just saying.

Key Points

  • Investing fossil free doesn’t have to cost—and in fact can have a financial benefit. New data from Fossil Free Indexes show that their fossil free version of the S&P 500 index outperformed its dirtier counterpart by 1.5% last year. This shows that divesting from fossil fuels and investing cleaner stocks has benefits for the planet as well as for the pocketbook.
  • Fossil fuel companies are pushing the world down a dangerous path. According to a study recently published in the scientific journal Nature, four-fifths of known fossil fuel reserves need to stay in the ground if the world is to avoid catastrophic climate change. This study found that almost all the huge coal reserves in China, Russia and the US must remain unused, along with all Arctic oil. Despite this, fossil fuel companies are aggressively exploring for new sources of coal, oil, and gas, and are reaping billions from government handouts to aid their dangerous efforts.
  • The potential costs of investing in fossil fuels cannot be ignored. More and more experts and insiders are telling investors that fossil fuel assets are an overvalued liability, since only a small fraction of known coal, oil, and gas can be burned if the world is to limit warming to 2DegC. Voices ranging from the public to the private sector have joined the chorus, highlighting the risks of having stakes in carbon assets that will be unburnable if governments take international climate commitments seriously. Meanwhile, at the World Economic Forum in Davos, UN climate chief Christiana Figueres said that the carbon bubble is now a reality and called “investment in oil and gas more risky than investment in renewables.”



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Key Quotes

  • “This outperformance illustrates the value of an investment strategy that is carbon-aware.”  – Barry Schachter, Chief Risk Officer at Woodbine Capital Management 
  • “We can infer from this year’s price volatility that future policy moves to reduce demand for fossil fuels can induce a dramatic reduction in the value of underground reserves.” – Barry Schachter, Chief Risk Officer at Woodbine Capital Management 
  • “Listed companies own twice the reserves that we can burn, if we are to stay below 2 degrees. Thus it makes no economic sense to spend money on new projects for extraction… As asset manager this is a good argument for dropping investment in the industry. It is a sun set industry, an industry in decline. And as an asset manager you have a duty to protect your capital.” – Mark Campanale, Founder of the Carbon Tracker Initiative

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