Fossil Fuel Companies Have Drastically Underperformed the Market

Analysis from The Australia Institute has found fossil fuels were the worst-performing section of the ASX300 over the past decade. A January 2010 investment of $100 in ASX’s energy index, which is dominated by fossil fuels, would have been worth just $104 in January 2020. 

The investment would have then fallen to $56 mid-last year during the Covid-19 pandemic. By contrast, an investment of $100 in the index overall would have yielded $237, falling to lows of $169 during the pandemic.

Excluding fossil fuels from an investment portfolio would have increased returns by 8.6% during the same period.

Fossil fuel companies have been subject to divestment campaigns for many years now. Initially led by activist-influenced funds like the Australian National University’s employee superannuation fund, climate concern last year reached major mainstream organisations like ANZ Bank.

Over the last decade, the evidence indicates healthcare and tech are the best sectors to be in, though every sector faces swings and roundabouts.

Lest this be construed as an Australian trend, the data show the laggardliness of energy stocks to be even more pronounced in the US. A January 2010 investment of $100 in the S&P500 was worth $376 in January 2020 and $293 at mid-year.

As emblematic of this trend, The Australia Institute highlight the financial performance of Exxon-Mobil. Once worth 5% of the entire S&P500, Exxon-Mobil shares had not increased in value at all as of January 2020, as compared with a decade before. 

The data underscores the simplistic nature of thinking that environmental damage is an avenue to easy financial returns.


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