Divestment analysis April 2020 update

Update: Divested funds still outperform market funds

Chart showing divested S&P 500 fund outperforms S&P 500 fund
Comparison of S&P 500 and S&P 500 ex. FF Returns (%)

The COVID-19 pandemic has brought global economies to a standstill as countries work to slow the spread of the coronavirus and avoid overwhelming health care systems. Stock markets have plummeted, global demand for oil has dropped significantly, and oil prices are experiencing extreme volatility. Many fund managers and beneficiaries of retirement systems are concerned about the performance of their assets.

An analysis performed by MassDivest in November 2019 showed that had the City of Somerville been allowed to divest a portion of its pension funds from the fossil fuel industry as it planned, it would have achieved 5.0 percent higher growth than it did by remaining invested in an index fund that includes fossil fuel companies.

Read the new analysis

Our updated analysis shows that even in these uncertain times, divesting from the fossil fuel industry makes financial sense. Markets are down, and invested pension funds have lost value, but divested funds still perform better. Looking at the market from July 2019, the month after our original analysis, through March 2020, the most recent month with full data available, we find that the divested portfolio would have achieved a return of -11.4 percent. In comparison, the S&P 500 produced a return of -13.3 percent.

Even during this dramatic economic downturn, fossil fuel divestment remains a prudent financial move.

Our bill, H.4440, is being considered by House lawmakers now, though the priority at the State House is, of course, addressing the COVID-19 crisis. House leaders have stated they want to make sure several other priorities, including climate change, are addressed in this session, so we are continuing to fight for our local option divestment bill, which would allow independent retirement systems across Massachusetts to divest from the fossil fuel industry, if they choose.

Read the new analysis