Netherlands-based Stichting Pensioenfonds ABP, the fifth largest pension fund in the world, has announced it will divest from fossil fuel producers.
The $600 billion pension fund says it has approximately $17.4 billion invested in the industry and plans to sell the majority of its fossil fuel assets in the first quarter of 2023.
While this move is part of a growing trend of divestments, the stock prices of major fossil fuel companies such as Shell and Exxon Mobil don’t seem to be immediately affected. But the growing environmental, social, and governance (ESG) movement has caused capital expenditure, aka capex, at fossil fuel companies to take a hit, according to Jack Janasiewicz, a portfolio manager at Natixis Investment Managers Solutions.
“There’s a shift in philosophy where a lot of these oil companies are focusing on a return on equity,” Janasiewicz said at a virtual roundtable hosted by Natixis. From 2015 to 2020, spending by majors on oil and gas production decreased by 49%, according to data from Bloomberg.
Analysts at the roundtable seemed to agree that the reopening of the economy in the wake of the pandemic, combined with a low supply of oil, has the potential to create high oil prices and opportunities for investors. “I still see a lot of bullish signals in energy,” said Kathryn Kaminski, chief research strategist at investment company AlphaSimplex.
Nevertheless, ABP’s move could also bode well for companies focused on renewable energy. Corien Wortmann, chairman of ABP’s board, said in a press release that, “Where possible, we intend to increase our investments in renewable energy.”
The pension currently has invested more than $4.6 billion to date in renewable energy.