Pension savers choosing fossil-fuel free pension plans are likely to have seen higher returns during 2023 than those in mainstream default plans, according to analysis by PensionBee, an online pension provider.
Comparing the MSCI ACWI ex. Fossil Fuels Index, which “excludes oil and gas producers, with the main MSCI ACWI index, in the year to October 31 2023, gross returns for the index excluding fossil fuels were 6.99% compared to 6.75% for the index that includes oil and gas producers.”
Over a ten-year period, the index excluding fossil fuels “has returned 7.18%, slightly higher than the 6.81% gross return for the mainstream index, on an annualized basis.”
Becky O’Connor, Director of Public Affairs at PensionBee, said:
“Market performance data dispels the myth that excluding fossil fuels means lower returns. Comparing two major indices: one that excludes fossil fuels and one that includes oil and gas companies, reveals that in both the short and long term, there has actually been marginal outperformance in the fossil fuel-free index. This suggests that global stock market performance no longer depends on the inclusion of oil and gas companies in the way it perhaps once did. This in turn means that a strategy of investing in oil and gas on the grounds that it is necessarily the best way to generate profits, is probably flawed.”
As noted in the update:
“This could be a key turning point in unravelling some of the long-held beliefs that global economies need to keep investing in fossil fuels to survive and thrive and that individuals need to keep invested in fossil fuels to benefit from investment growth. It appears that capital markets do not agree.”
Delegates at COP28 in the United Arab Emirates “continue to thrash out how to switch the world away from fossil fuels and focus on renewable energy generation instead and the heat is turned up on global governments and companies to create urgent change now.”
The UK defined contribution pension market “is worth an estimated £1 trillion and through campaigns such as Richard Curtis’s Make My Money Matter, is under increasing pressure to show its cards on the issue of manmade climate change.”
PensionBee has offered a Fossil Fuel Free Plan to customers “since December 2020 and an Impact plan since February 2023. PensionBee’s Impact Plan only invests in companies having a demonstrable positive impact for people and planet.”
PensionBee has publicly committed “to publishing its carbon emission reduction targets this financial year, including scope 1,2 and 3 emissions, in line with the Paris agreement.”
Since May 2023, PensionBee has been able “to vote on behalf of customers at the AGMs of major global companies that are held within its pension plans, through asset managers BlackRock and State Street Global Advisors.”
‘Voting Choice’ is offered “in three PensionBee plans; the Tailored Plan, Tracker Plan and 4Plus Plan. Under Voting Choice, PensionBee has the ability to vote using a voting policy from Institutional Shareholder Services (ISS), a global proxy voting provider.”