Pension funds’ argument that they have to keep investing in the fossil fuel sector in order not to jeopardize returns is not true, according to professors Bert Scholtens and Auke Plantinga of the University of Groningen, who researched investments in 7 thousand companies world wide, Trouw reports.
Divesting from coal, oil and gas will not endanger the retirement provision, Scholtens said to the newspaper. “Pension funds fear that without these fossil interests they will miss out on an important part of the market. But that is not the case, there are still sufficient possibilities to achieve the intended investment goals.”
Investments in fossil fuels usually involve high profits, linked to higher risks – fossil fuel companies give investors more returns to entice them, because there are also bad years in the sector. Pension funds strive for a good mix of different types of investments in order to guarantee the payment of their pensions, and that includes the fossil fuels’ riskier, but usually lucrative investments, they say. But Scholtens and Plantinga found that the fossil fuel sector is not so unique that it absolutely has to be in a balanced investment profiles. There are plenty of other opportunities to spread risks and profits, they said.
Pension funds also argue that as investors, they can play a role in the fossil fuel sector’s transition to cleaner energy by holding them accountable for climate goals. If they sell their shares, they will no longer have the power to influence the fossil fuel companies, they argue.
But this too is not the case, the two scientists said. “Companies such as Shell and BP argue: we are important in the energy market, we are big, we have to stay in it. Help us make the switch. They have good plans on paper, with promises far away: in 2040 we will do this or that. They have good networks and are easily heard by policy makers. But you have to take this whole story with a grain of salt. They simply will not be profitable enough to yield the huge investments required. A completely different business model is needed for that.”