Fossil Fuel-Related Investments and Climate Change

17 Pages Posted: 14 Nov 2021

See all articles by Dirk Schoenmaker

Dirk Schoenmaker

Rotterdam School of Management, Erasmus University; Erasmus Research Institute of Management (ERIM); Centre for Economic Policy Research (CEPR)

Roel M. W. J. Beetsma

University of Amsterdam - Research Institute in Economics & Econometrics (RESAM); European Commission; Centre for Economic Policy Research (CEPR); CESifo (Center for Economic Studies and Ifo Institute); Tinbergen Institute; Netspar

Heleen de Coninck

Radhoud University

Date Written: November 12, 2021

Abstract

Pressure is mounting on institutional investors to reduce the greenhouse gas emissions resulting from their fossil fuel-related investments. The latest climate change assessments indicate that 1.5°C emission pathways require (1) halving CO2 emissions between 2010 to 2030, and net zero CO2 in 2050; and (2) systems transitions in sectors such as energy, industry, mobility and buildings.

Pension funds are universal asset owners, which brings a shared responsibility for the system transitions. As credible engagement with a company is costly, we recommend pension funds to focus on a limited number of fossil fuel and other major carbon-emitting companies in a more concentrated portfolio. We suggest pension funds (1) to select those companies with a commitment to fully decarbonise with an ambitious and predefined time path and limited use of carbon dioxide removal; (2) to engage deeply with these companies and monitor annually predefined reductions in emissions; and (3) to vote for resolutions that require reductions in greenhouse gas emissions in line with the latest available science.

Keywords: Pension funds, responsible investing, fossil fuels, climate change, engagement

JEL Classification: G11, G23, G34, Q40, Q54

Suggested Citation

Schoenmaker, Dirk and Beetsma, Roel M. W. J. and de Coninck, Heleen, Fossil Fuel-Related Investments and Climate Change (November 12, 2021). Available at SSRN: https://ssrn.com/abstract=3961992 or http://dx.doi.org/10.2139/ssrn.3961992

Dirk Schoenmaker (Contact Author)

Rotterdam School of Management, Erasmus University ( email )

P.O. Box 1738
Room T08-21
3000 DR Rotterdam
Netherlands

HOME PAGE: http://www.rsm.nl/people/dirk-schoenmaker/

Erasmus Research Institute of Management (ERIM) ( email )

P.O. Box 1738
3000 DR Rotterdam
Netherlands

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Roel M. W. J. Beetsma

University of Amsterdam - Research Institute in Economics & Econometrics (RESAM) ( email )

P.O.Box 15867
Amsterdam
Netherlands
+31 20 525 5280 (Phone)

European Commission ( email )

Rue de la Loi 200
Brussels, B-1049
Belgium

Centre for Economic Policy Research (CEPR)

London
United Kingdom

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

HOME PAGE: http://www.CESifo.de

Tinbergen Institute ( email )

Gustav Mahlerplein 117
Amsterdam, 1082 MS
Netherlands

Netspar ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

Heleen De Coninck

Radhoud University ( email )

Nijmegen, 6500 GL
Netherlands

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
142
Abstract Views
951
Rank
433,704
PlumX Metrics