Recently, a number of institutional investors, including Caisse de dépôt et placement du Québec in Canada and Norway’s sovereign wealth fund, announced their intent to reduce their exposure in investments linked to fossil fuels. But do divestment and divestment announcements have a financial impact on the share price of fossil fuel companies?
A team of researchers at the School of Environment, Enterprise and Development (SEED) at the University of Waterloo, headed by professor Olaf Weber, recently conducted an analysis that suggests divestment announcements have a statistically significant negative impact on the price of fossil fuel shares. The study aggregates the impact of more than 20 announcements across 200 publicly traded fossil fuel companies.
The results suggest that share prices dropped on the days that institutional investors announced they were divesting of fossil fuels.