The dark side of diversification: Passive finance and fossil-fuel investment
What shapes fossil-fuel investment and divestment decisions? What are pension funds’ climate-related considerations? And how do conceptions of portfolio risk influence these issues? Danish pension funds constitute a rare and understudied cohort of investors who have undertaken comparatively progress...
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| Format: | Article |
| Language: | English |
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Cambridge University Press
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| Series: | Finance and Society |
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| Online Access: | https://www.cambridge.org/core/product/identifier/S2059599925100071/type/journal_article |
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| author | Johannes Lundberg |
| author_facet | Johannes Lundberg |
| author_sort | Johannes Lundberg |
| collection | DOAJ |
| description | What shapes fossil-fuel investment and divestment decisions? What are pension funds’ climate-related considerations? And how do conceptions of portfolio risk influence these issues? Danish pension funds constitute a rare and understudied cohort of investors who have undertaken comparatively progressive fossil-fuel investment decisions. Simultaneously, diversification and market rationality have frequently been invoked as obstacles to divestment and active ownership. Using the Danish experience, this article conducts an archaeological analysis of the concept of portfolio risk, unearthing the various ways in which it has shaped fossil-fuel investment decisions. The analysis identifies five key aspects through which the concept has hampered Danish pension funds’ active ownership and fossil-fuel divestment decisions (sector diversification, externalities, market rationality, dispersed ownership, and passive index investing). The article argues that these discursive aspects have reinforced a passive tendency within finance capitalism to bolster the status quo, thereby supporting prevailing market actors and the continued extraction of fossil fuels. |
| format | Article |
| id | doaj-art-fa31c17d947b46e5b0eab7fd049b40d5 |
| institution | Matheson Library |
| issn | 2059-5999 |
| language | English |
| publisher | Cambridge University Press |
| record_format | Article |
| series | Finance and Society |
| spelling | doaj-art-fa31c17d947b46e5b0eab7fd049b40d52025-07-23T06:35:24ZengCambridge University PressFinance and Society2059-599912210.1017/fas.2025.10007The dark side of diversification: Passive finance and fossil-fuel investmentJohannes Lundberg0https://orcid.org/0000-0002-0305-0009Independent scholar, DenmarkWhat shapes fossil-fuel investment and divestment decisions? What are pension funds’ climate-related considerations? And how do conceptions of portfolio risk influence these issues? Danish pension funds constitute a rare and understudied cohort of investors who have undertaken comparatively progressive fossil-fuel investment decisions. Simultaneously, diversification and market rationality have frequently been invoked as obstacles to divestment and active ownership. Using the Danish experience, this article conducts an archaeological analysis of the concept of portfolio risk, unearthing the various ways in which it has shaped fossil-fuel investment decisions. The analysis identifies five key aspects through which the concept has hampered Danish pension funds’ active ownership and fossil-fuel divestment decisions (sector diversification, externalities, market rationality, dispersed ownership, and passive index investing). The article argues that these discursive aspects have reinforced a passive tendency within finance capitalism to bolster the status quo, thereby supporting prevailing market actors and the continued extraction of fossil fuels.https://www.cambridge.org/core/product/identifier/S2059599925100071/type/journal_articleriskmodern portfolio theoryfossil-fuel divestmentDanish pension fundsarchaeology of finance |
| spellingShingle | Johannes Lundberg The dark side of diversification: Passive finance and fossil-fuel investment Finance and Society risk modern portfolio theory fossil-fuel divestment Danish pension funds archaeology of finance |
| title | The dark side of diversification: Passive finance and fossil-fuel investment |
| title_full | The dark side of diversification: Passive finance and fossil-fuel investment |
| title_fullStr | The dark side of diversification: Passive finance and fossil-fuel investment |
| title_full_unstemmed | The dark side of diversification: Passive finance and fossil-fuel investment |
| title_short | The dark side of diversification: Passive finance and fossil-fuel investment |
| title_sort | dark side of diversification passive finance and fossil fuel investment |
| topic | risk modern portfolio theory fossil-fuel divestment Danish pension funds archaeology of finance |
| url | https://www.cambridge.org/core/product/identifier/S2059599925100071/type/journal_article |
| work_keys_str_mv | AT johanneslundberg thedarksideofdiversificationpassivefinanceandfossilfuelinvestment AT johanneslundberg darksideofdiversificationpassivefinanceandfossilfuelinvestment |