Decades after one of the greatest businessmen in history created an oil production and distribution empire, his descendants have built a fund they say has beaten broader market returns by divesting from fossil fuels.

The Rockefeller Brothers Fund has crowed about how investment returns have beaten broader markets since it dumped fossil fuels, an ironic twist for an organization tracing its origins to renowned oil industry titan John D Rockefeller.

Earlier this week RBF released Investing in Our Mission, a new case study detailing how its investment returns “beat market benchmarks since divesting from fossil fuels five years ago”.

RBF said that it posted an average annual net return of 7.76 per cent over the five-year period that ended December 31, 2019. Over the same period, an index portfolio made up of 70 per cent stocks and 30 per cent bonds - including coal, oil, and gas holdings - returned 6.71 per cent annually.

The report will drive debate over the efficacy of so-called “Green” investing, an approach that concentrates on avoiding fossil fuels such as oil, natural gas and coal, and pivoting to solar, geothermal, tidal and hydroelectric power (and possibly, controversially, nuclear energy). And this story fits within the ESG agenda – environmental, social and governance-themed investing.

The RBF said that when announced in September 2014 it was divesting from fossil fuels, the body said the move was seen as “largely symbolic” because of the oddity of an oil industry dynasty spurning the very energy that had made it so rich.

The fund pours about $15 million each year into climate change solutions.

“When we joined the divestment movement, we were convinced that a more profitable and less risky investment portfolio could be constructed without exposure to fossil fuels,” Valerie Rockefeller, great-great-granddaughter of John D Rockefeller and chair of the RBF board of trustees, said. “Now we have five years of financial data to back it up.”

The divestment movement accounted for just $50 billion in global assets under management when the Rockefeller Brothers Fund signed on in 2014. That number has swelled to around $12 trillion today, as advocates such as the RBF and its grantees press other foundations, universities, governments, companies, and banks to withdraw their money from the fossil fuel industry. 

The report cites recent moves by financial powerhouses like BlackRock and Goldman Sachs as further evidence that fossil fuel stocks are increasingly seen as poor investments. The fund’s press release also noted how, as a result of the pandemic-induced shutdowns, emissions have dropped dramatically because of collapsing industrial output and flight cancellations.

There remains a broad policy consensus among Western governments – perhaps less so in Asia – that fossil fuels must be removed from the energy chain, although there is debate about timing and political acceptance. Official opinion is that carbon dioxide emissions cause dangerous global warming. Not everyone is on board, however: academic Alex Epstein, who founded the Center for Industrial Progress in the US, published a book in 2017 with the eye-catching title, The Moral Case for Fossil Fuels. And one controversy is whether nuclear energy, which generates waste, should be in the toolbox of “clean energy”, or not.

(Editor’s note: It certainly is remarkable but perhaps not so strange that an oil-driven dynasty is switching to different sectors and avoiding fossil fuels. John D Rockefeller understood that no industry lives forever. He made his fortune in the boom years after the Civil War, a time when the benefits of cheap fuel far outweighed whatever alleged harms it might have caused later. Let’s not forget that when Standard Oil of Ohio got going, most people had to light their homes with whale oil – nasty, smelly stuff that also required killing these beasts of the oceans. And modern technology – which entrepreneurs such as Rockefeller championed – made cleaner energy eventually possible, along with so many other goods and services we take for granted. A report (Citi Private Bank, February) noted that by some metrics, solar energy produces cheaper electricity than carbon. But without a world of cheap energy, producing huge numbers of solar panels would be impossible. The RBF is an example, perhaps, of this narrative.)