Fossil Fuel Divestment and Portfolio Performance

Arjan Trinks, Arjan Trinks, Machiel Mulder

2018 | Academic | Divestment, Risk & Performance

Contrary to theoretical expectations, we find that fossil fuel divestment does not seem to impair portfolio performance. These findings can be explained by the fact that, so far, fossil fuel company stocks do not outperform other stocks on a risk-adjusted basis and provide relatively limited diversification benefits. A more pronounced performance impact of divestment can be observed over short time frames and when applied to less diversified market indices.