Investing Ideas

What portfolios may miss by divesting from fossil fuels

An actively managed approach could provide investors exposure to best-in-class companies while supporting the climate transition.

By: Ariel Babcock Nicole Connolly Michael Robertson
Updated: 6/11/2024
Key Takeaways
  • A divest-and-exclude approach toward carbon-intensive companies and industries may be overly focused on mitigating perceived risk in the shorter term and could instead remove return opportunities in actively managed investment strategies over the longer term.
  • While some segments of the transition economy will be new, we expect decarbonization to resemble the Industrial Revolution more closely than the advances of the Digital Age—and expect the heavy carbon-emitting companies of today to be key players in the long-term solutions of tomorrow.
  • Allocating capital to companies (including fossil fuel companies) investing in new technologies and industries focused on decarbonization, while providing scale capital to remake the economy, may be more financially rewarding over the long term.
  • Rather than avoiding carbon-intensive businesses altogether, a sector-relative approach focused on best-in-class companies positioned to win over the long term provides active portfolio managers with a broader investment universe for identifying best ideas.
  • Fidelity’s actively managed sustainable investment strategies pursue investment opportunities across sectors and rely on robust research and analysis to identify diamonds in the rough.
Get the full white paper
What portfolios may miss by divesting from fossil fuels
Download PDF
Explore more on:
Equity Long-term research Sustainable

Next steps to consider

Sustainable Investing Solutions

Sustainable Investing Strategies

Help your clients align their portfolios with their investment and sustainability goals.

Learn more

Sector Industry

Sector/Industry

Target specific segments of the economy with our full spectrum of sector funds, ETFs, and other solutions.

Learn more

Portfolio Construction Solutions

Get ready to manage your client portfolios—and relationships—more effectively with Fidelity's powerful portfolio construction insights, tools, and solutions.

Learn more

Employee benefit plans may wish to consult with their ERISA counsel regarding the evaluation of investment or investment courses of action that incorporate non-pecuniary factors.

Investing involves risk, including risk of loss.

Diversification and asset allocation do not ensure a profit or guarantee against loss. Investment decisions should be based on an individual’s own goals, time horizon, and tolerance for risk.

1153020.1
A32FC6141C3049E78BF677B0CB77B268