Green Century has been a champion of fossil fuel free investing for decades, and recent news about the energy sector’s volatility serves as a reminder of just some of the reasons.
Green Century embraced fossil fuel divestment principally to offer individuals a way to invest without supporting the world’s most environmentally harmful industries. Coal, oil and gas companies — key drivers of air pollution, water contamination and climate change — top our list of corporations damaging our health and environment.
Volatility of Fossil Fuels
In addition to the ample moral and ethical reasons for our choices, there also are financial ones. Energy, while occasionally a top performer, has experienced long periods of underperformance. The fossil fuel sector’s volatility has been on full display over the past year, but it was also the most volatile of any S&P sector over the previous decade (2015- 2024). For investors seeking to avoid sudden or dramatic swings, avoiding the fossil fuel industry is an understandable choice. Keeping in mind that markets and sectors are inherently unpredictable, and past performance does not guarantee future results, years of evidence suggest that this may be especially true for long-term investors who are planning their futures.
Fossil Fuel Sector Underperforms
The Institute for Energy Economics and Energy reported that during this same period, the “fossil fuel sector has underperformed the S&P 500 in seven of the last 10 years, delivering the lowest performance of any S&P sector” and stated that “oil, gas, and coal have often been unreliable and inconsistent contributors to long-term investment portfolios.”
As of March 2026, the energy sector accounted for approximately 2.9% to 3.5% of the S&P 500 index. For an average large-cap index fund, the actual percentage of energy holdings would tend to closely follow the underlying index allocation. Active managers can over- or underweight the energy sector according to their investment strategy.
Investing Without Fossil Fuels
A fossil fuel free portfolio typically holds 0% in the energy sector, thereby avoiding companies involved in the exploration, production, transmission or management of coal, oil and gas, as well as companies that service these industries. Clean and renewable energy companies are not in this sector. Instead, they are categorized in several other sectors, including utilities, industrials and technology (manufacturing).
Geopolitics are a key driver of the fossil fuel sector’s unpredictability and are likely to continue to be so. Fossil fuel free investors can avoid this unpredictable sector as they align their investments with their values.