The $1.11 billion Rockefeller Brothers Fund, a philanthropy founded by the eponymous family that made its fortune from oil, is boasting that divesting from fossil fuels in 2014 has provided better returns for its portfolio than if it hadn’t divested.
The fund said that in the five-year period ending Dec. 31, 2019, its portfolio returned 7.76%, while an index portfolio made up of 70% stocks and 30%, which includes coal, oil, and gas holdings, returned only 6.71% annually over the same period.
“When we joined the divestment movement, we were convinced that a more profitable and less risky investment portfolio could be constructed without exposure to fossil fuels,” Valerie Rockefeller, chair of the Rockefeller Brothers Fund’s board of trustees, and great-great-granddaughter of John D. Rockefeller, said in a release. “Now we have five years of financial data to back it up.”
Rockefeller Brothers began to divest from fossil fuels in 2014 and has since all but eliminated coal and tar sands from the endowment and dramatically reduced total fossil fuel exposure. It also has expanded its so-called “impact investments,” which it says are on pace to become 20% of the portfolio within a few years. The fund defines impact investments as investments that deliver market-grade returns and generate meaningful and measurable impact on the fund’s mission to advance social change.
When the first comprehensive analysis of fossil fuel exposure in the endowment was conducted by its money management firm Agility, carbon-intensive coal and tar sands accounted for 1.6% of the portfolio, and total exposure to all fossil fuels stood at 6.6%.
The divestment commitment Rockefeller Brothers made in 2014 vowed to eliminate from the portfolio of all exposures to coal and tar sands, which it says are particularly carbon-intensive, and then examine how best to purge the endowment of oil and gas. To cut fossil fuel exposure, the fund sold off mutual funds, exchange-traded funds (ETFs), hedge funds, and other investment vehicles that owned the stocks or bonds of energy producers—or any company that held fossil fuel reserves.
Rockefeller Brothers says that, as of the end of 2019, the endowment was 99% fossil fuel free. Coal and tar sands account for less than 0.1% of the fund, while the other 0.9% that still has fossil fuel exposures are legacy investments that are running off. These are a subset of assets the fund categorizes as traditional, which means they do not have explicit agreements preventing managers from holding fossil fuels.
Traditional investments account for 31.6% of the Rockefeller Brothers’ investment portfolio. New investments in this category are assessed to determine that they don’t hold fossil fuel reserves and are not involved in fossil fuel industries. For example, a fund that invests in biotechnology stocks may not have a specific mandate to exclude fossil fuels, but the definition of the fund’s investment objectives will all but guarantee such an exclusion.
To determine which public companies hold coal, oil, and gas reserves and are ineligible for the Rockefeller Brothers endowment, Agility relies primarily on the MSCI Fossil Fuel Reserves Screen. This identifies nearly 400 companies across a range of industries that own fossil fuel reserves. That’s out of a total universe of about 8,500 securities in the MSCI All Country World Index that the fund uses as its equity benchmark.
“Oil is obviously a definitional part of my family’s past,” Rockefeller said. “But it has no place in our future.”