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Major investment advisors BlackRock and Meketa provide a fiduciary path through the energy transition

March 22, 2021
Tom Sanzillo

Two major financial management firms, BlackRock and Meketa, have separately concluded that investment funds have experienced no negative financial impacts  from divesting from fossil fuels. In fact, they found evidence of modest improvement in fund return, according to draft reports undertaken at the request of New York City’s comptroller on behalf of three of the city’s pension funds.

Several of their core findings are noteworthy:

  • Divestment actions by hundreds of funds worldwide have passed the prudence tests required of fiduciaries.
  • Fossil fuel stocks have underperformed for the last five years and forward-looking analysis shows they are exposed to significant regulatory, technological and market risks.
  • Transition readiness standards allow Funds to improve their targeting of how divestment can take place in a way that aligns with the philosophy and mission of a specific Fund.
  • There is no uniform model for divestment. Some funds divested from coal but most adopted broader divestment strategies across the coal, oil and gas sectors. All divestment options have proven to be financially sound.
  • The global trend in the investment world is toward more public pension fund divestment from fossil fuels. In the past, such actions were mostly consigned to university, foundations and other private institutions. The size of individual Funds that are currently divesting is increasing.

The companies undertook this research under contract to advise on the divestment plans of the New York City Employees ‘ Retirement System (NYCEDRS), the Teachers Retirement System (TRS) and the Board of Education Retirement System (BERS), which had set goals for divestiture but wanted advice on how to develop and implement an orderly divestment process.

BlackRock and Meketa each produced three draft reports related to divestment: 1) a survey of asset owners that divested and those that did not divest; 2) an analysis of the types of financial, environmental and climate risks faced by fossil fuel companies and standards for readiness to address the transition;  and 3) an assessment of divestment options and portfolio performance.

These reports should be required reading for anyone with an interest in the topic.

  • They are prepared for a fiduciary’s use. The reports have wide applicability as a road map for other funds and investors that are deliberating climate impact and risk. The studies carry the trademark of BlackRock, one of the most respected investment houses in the world and also Meketa: a mid-sized investment advisor that is future-forward. In other words, these are not studies that can be easily dismissed as fundamentally either pro- or anti-fossil fuel.
  • The research and conclusions are, above all, practical. They include an extensive treatment of how other funds of varying sizes and missions have arrived at the decision to divest. They discuss what policies these funds adopted, the timing and any other steps needed for implementation.
  • Questions of fiduciary obligation, costs, post-divestment performance asssessment, adoption of climate action plans and investments in renewable energy are all addressed.
  • They contain several research products that add to the literature on investment theory and climate change, corporate finance and the dynamics of introducing sustainability standards into the traditional fiduciary model. The research perspective pertains to specific stand-alone strategies of individual companies and their management of sustainability and broader economy-wide trade-offs that are taking place as part of the energy transition. One constant theme that runs through the reports is that the adoption of sustainable investment standards is not penalized by the market, but rather is, by and large, rewarded.
  • These arguments are useful to fiduciaries, but they are perhaps even more valuable to investment professionals who have been reluctant to support divestment as a sound approach. The research leaves few arguments remaining on the table about whether divestment is valid and can be achieved, or why it is increasingly important as a risk-mitigation strategy.

These reports are the product of investment professionals. They are produced for a fiduciary that is offering a leadership position on the issue of investments and climate change. The fiduciary has accepted its financial obligation. The enormity of the climate issue is not clouding its pursuit of the best fiduciary decision. The studies show, at bottom, that the traditional requirements of prudence and due diligence continue to provide clear direction through a period of immense change, and that divestment from fossil fuels is a responsible course of action for the fiduciary of an investment fund.


Tom Sanzillo ([email protected]) is IEEFA’s director of financial analysis.

Media contact: Vivienne Heston ([email protected]) +1 (914) 439-8921


Draft reports:

BlackRock: Investment and Fiduciary Analysis for Potential Fossil Fuel Divestment – Phase One – Survey of Divestments and Identification of Securities

Investment and Fiduciary Analysis for Potential Fossil Fuel Divestment – Phase Two – Identification, Analysis and Evaluation of Investment Risks

Investment and Fiduciary Analysis for Potential Fossil Fuel Divestment – Phase Three Identification, Analysis and Evaluation of Prudent Strategies

Meketa: Investment and Fiduciary Analysis of Prudent Strategies for Divestment of Securities Issued by Fossil Fuel Reserve Owners – Phase 1 – Asset Ownder Survey and Definitions

Investment and Fiduciary Analysis of Prudent Strategies for Divestment of Securities Issued by Fossil Fuel Reserve Owners – Phase 2 – Analysis of Fossil Fuel Reserve Owners

Investment and Fiduciary Analysis of Prudent Strategies for Divestment of Securities Issued by Fossil Fuel Reserve Owners – Phase 3 – Options for Prudent Divestment from Fossil Fuel Reserve Owners

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IEEFA: NYS Comptroller DiNapoli’s bold divestment plan may inspire investors to follow suit

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IEEFA op-ed: It’s time for New Jersey to divest from fossil fuels

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Tom Sanzillo

Tom Sanzillo is Director of Financial Analysis for IEEFA. He has produced influential studies on the oil, gas, petrochemical and coal sectors in the U.S. and internationally, including company and credit analyses, facility development, oil and gas reserves, stock and commodity market analysis, and public and private financial structures.

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