Eliminating the fossil fuel sector from a global benchmark index can yield a small positive return effect with low tracking error, according to analysis by Impax Asset Management.
Impax created model equity portfolios structured around fossil fuel divestment and tilts towards energy efficiency and renewable energy investments. Impax evaluated the impact of fossil fuel divestment because there is a strengthening campaign seeking to persuade institutional investors to divest from fossil fuel-based assets as a way of protecting against the downside risk of climate change as well as the potential return of renewable energy investments.
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