In the five years since the Rockefeller Brothers Fund announced plans to divest its investment portfolio of fossil fuels, its investment returns have beaten comparable market benchmarks, a report from the foundation finds.
The report, Investing in Our Mission: A Five-Year Case Study of Fossil Fuel Divestment at the Rockefeller Brothers Fund (40 pages, PDF), found that RBF posted an average annual net return of 7.76 percent over the five-year period ending December 31, 2019, compared with 6.71 percent for an index portfolio comprising 70 percent stocks and 30 percent bonds and including coal, oil, and gas holdings. Between 2014 and 2019, RBF reduced its portfolio investments in fossil fuel and carbon-intensive coal and tar sands from 6.6 percent and 1.6 percent, respectively, to 1 percent and 0.05 percent.
According to the report, the portfolio also has shown less volatility than the 70/30 global stocks/bonds benchmark, with an annualized standard deviation that is 27 percent lower than that of the benchmark. For example, in the first quarter of 2020, as the COVID-19 pandemic brought the curtains down on the long bull market, the RBF endowment declined 11.18 percent. By comparison, a 70/30 global stocks/bonds benchmark that uses a fossil fuel-free version of the equity index fell 14.31 percent, while the standard benchmark that includes fossil fuel companies was down 15.05 percent.
When the fund established by the grandsons of John D. Rockefeller, who made his fortune in oil, joined the Divest-Invest movement, the move was considered largely symbolic. RBF, which invests about $15 million a year in climate change solutions, set out to make both a moral and financial case against fossil fuel holdings, which it believes will drop in value as the world shifts to renewable forms of energy. Impact investments, to which RBF pledged in 2010 to dedicate up to 10 percent of its portfolio, now account for 14 percent of its endowment assets.
"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," said RBF board chair Valerie Rockefeller, a great-great-granddaughter of John D. Rockefeller. "Now we have five years of financial data to back it up."