The rationale for fossil-fuel divestment ranges from simply avoiding companies with objectionable activities to attempting to positively impact the environment or send a political message to making an active call on the future of companies that own fossil-fuel reserves. Yet most investors are similarly concerned about the potential impact of this decision on a portfolio’s risk and return. Historically, this impact has appeared to be fairly moderate but not entirely inconsequential. For taxable investors, an additional consideration of divesting is potential gain realization, particularly for those with long-term, appreciated holdings.
Parametric has several options for investors interested in constructing fossil-free portfolios. In this brief we explain some of the implementation considerations of our approaches to help investors decide what best suits their needs.