It has paid to keep fossil fuel investments out of your portfolio.
In a recent study, MSCI created a child measure from its All Country World Index called the MSCI ACWI ex Fossil Fuels Index, and compared both since November 2010.
Excluding companies with oil, gas and coal reserves, “it is a benchmark for investors who aim to eliminate fossil fuel reserves exposure from their investments due to concern that these reserves could potentially be stranded in the transition to a low carbon economy,” MSCI noted.
Of course, the more than 50% slump in oil prices since last June has been bad for energy stocks, so an outperformance by non-energy names would be expected. As the chart below shows, the gap in gross returns started to widen towards the end of last year.
However, MSCI’s index ex fossil fuels outperformed its broader index before the oil crash, by 1.53% in 2013 and by 1.8% in 2012.
And over the last 10 years, the gross annualized returns on the MSCI ACWI ex Fossil Fuels has been 62.2%, compared to 69.9% for the MSCI ACWI.
These findings also come alongside ongoing civil campaigns against investments in fossil fuel companies. On Sunday night, a group of students, faculty, and alumni at Harvard University demonstrated against its $US36.4 billion endowment’s investment in fossil fuels, the Boston Globe reported.
Here’s the chart via MSCI with the gross returns on both indexes.
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