New report spotlights divestment as a sound investment strategy for increased resilience and annualized returns
Vancouver, BC, Oct. 29, 2020 (GLOBE NEWSWIRE) — Genus Capital today released its 2020 Divestment Report on its seven-year fossil free investment data, which shows that divesting from fossil fuels not only has a positive effect on returns, but also mediates volatility and increases portfolio resiliency. Investors who divested from fossil fuels from May 31, 2013 to July 31 2020, using Genus Capital’s Fossil Free CanGlobe Equity Fund generated a 12.82 per cent annualized return1,2,3 without contributing to the climate crisis. Genus’ Fossil Free CanGlobe Equity Fund outperformed the returns of its benchmark4 (10.95 per cent) and the overall Canadian stock market index (6.68%), both of which include coal and major carbon-producing industries.“In previous years, uptake of divestment among investors has been clouded with misconceptions that reducing exposure to the fossil free value chain, negatively impacts annualized returns. But, this view is outdated,” said Genus’ Partner & Director, Sustainable Investments, Mike Thiessen. “Through our Fossil Free fund data, we have consistently shown that divestment pays without significantly increasing volatility, and this year is no exception.“Due to the pandemic, we have also captured in our report the increased resilience of investments that take into account environmental, social and governance (ESG) factors. Canadian investors are becoming increasingly attuned to the fact that divestment is not just a socially or environmentally conscious decision, it’s a smart one too.”“Our sustainable funds have grown by 377% per cent over the last seven years. This popularity will only accelerate; not only do Canadian investors want reliable returns, an increasing number will consider climate change an important priority to factor into investment decisions.”Here are some additional takeaways from the research:Genus found that optimized portfolios without exposure to companies involved in extracting, refining or transporting fossil fuels can do better than those with investments in energy companies that create mass carbon pollution. The assumption of a return penalty is not consistent with its research.Genus’ research shows divestment of fossil fuel stocks and prudent, well managed reinvestment in cleaner and more efficient energy solutions, coupled with active stock selection, can be a sound strategy for investors looking to avoid climate-related risks and capitalize on investment opportunities.Genus believes fossil fuel divestment has the potential to reduce overall portfolio risk (because of energy sector volatility and stranded asset risk) with the transfer of assets from the energy sector to companies in climate-friendly sectors highly correlated with it.Genus’ fossil free equity funds combined Canadian and global stocks into a single optimized strategy that emphasized top industries in each region, helping to fill the energy gaps with strong companies in other economically sensitive sectors with the potential to achieve energy sector-like stock price exposure.The Fossil Free CanGlobe Equity Fund has outperformed its benchmarks since its inception in 2013. For more information and to view the report, please visit: https://genuscap.com/2020-divestment-report/About Genus Capital Management Inc.
Genus Capital Management Inc. is an independent investment management firm based in Vancouver, founded in 1989. Genus is passionate about creating innovative investment solutions that meet our clients’ changing needs. With more than $1.6 billion in assets under management, Genus’ clients include leading environmental organizations, foundations, and individuals across Canada. Today, Genus Capital is at the forefront of Canada’s Divest-Invest movement with a complete suite of fossil fuel free funds that are tailored to meet the needs of investors who wish to invest in a sustainable, clean energy future.
Footnotes1 The Genus Fossil Free CanGlobe Equity Fund (25% Canada, 75% Global) generated a 12.82% annualized return from May 31, 2013 to July 31, 2020. The equity fund’s benchmark, against which performance is measured, generated 10.95% for over seven years ended July 31, 20202 Fund Returns are presented gross of management fees and include the reinvestment of all income3 Past performance is no guarantee of future performance4 Fossil Free CanGlobe Equity Benchmark: 35% S&P/TSX Composite, 65% MSCI World (04/01/2015 – Present). Benchmark changed from 40% S&P/TSX Composite, 30% MSCI EAFE, 30% S&P 500 (04/09/2013 – 03/31/2015)