Put Your Money Where Your Mouth Is & Invest for Good!

As the saying goes: Put your money where your mouth is. That is exactly what is advocated by environmental champion Bill McKibben, as he calls for investors worldwide to divest from fossil fuel holdings. This demonstrates a strong commitment by investors to withhold support for the fossil fuel industry responsible for the much of the emissions of climate change causing greenhouse gas emissions.  Read more

Investors back away from fossil fuel assets and fracking

Long-term investors are divesting from fossil fuels and saying no to fracking. Is the writing on the wall for oil, coal and gas?

By Oliver Wagg in Guardian Professional (18 July 2013):

On his recent trip to Australia, climate activist Bill McKibben tried to persuade financiers to join his quest to rid the planet of fossil fuels.

Climate change disciple Bill McKibben, co-founder of environmental campaign group 350.org, underwent a baptism by fire on his June tour of Australia, one of the world’s largest fossil fuel producers and polluters per capita.

Having stepped off his plane from the US on to the set of the nation’s premier debate show, the ABC’s Q&A, McKibben spent the next day trying to convince Australia’s financiers to join his quest to rid the planet of polluting fossil fuels. Next stop – the Uniting Church of New South Wales and Australian Capital Territory – to say a big thank you for being the first church in the world to divest their portfolio of fossil fuel holdings.

Just as tobacco, alcohol and munitions have been shunned by church investment funds as sin stocks for years, polluting fossil fuels are now being targeted because of their substantial contribution to environmental degradation. The Uniting Church says fossil fuel industries exacerbate the “climate change emergency” and cause great harm. Divestment is the solution and is considered more effective than lobbying state and federal governments for tougher regulations.

This month, one of the biggest and most influential US church groups, the 1.1 million member United Church of Christ (UCC) announced a plan to divest its fossil-fuel holdings, making it the first major US religious body to do so. While its Australian counterparts have deployed a negative screen, whereby holdings in fossil fuel companies are simply excluded, the UCC calls for shareholders to “engage with fossil fuel companies, intensively search for fossil fuel-free investment vehicles and identify ‘best in class’ fossil fuel companies”.

By June 2018, a plan would be prepared to divest UCC funds in any fossil-fuel company, except for those identified as “best in class” – meaning those that are top of the class for mitigating the environmental impact of extracting and burning of fossil fuels.

A similar best-in-class approach is employed by big institutional investors. One of Norway’s biggest insurers and pension funds, the €60bn Storebrand, announced in early July the exclusion of 13 coal and six oil companies with exposures to oil sands to reduce its exposure to secure long-term, stable returns.

“There is too much risk in fossil fuel in the long run – at some point that is going to affect the valuation of the companies,” says Storebrand’s head of sustainable investments, Christine Tørklep Meisingset. “We’re a long-term investor – we have to be there in 30, 40 or 50 years time to provide pensions, which is one of the reasons we have been working in the sustainable investment space.”

Meisingset says identifying a sustainable fossil fuel company is in reality challenging, although there are differences in their performance over a whole set of criteria. “That’s what we use our sustainability ratings for – to gradually increase the quality of what we own. In addition, we screen out the worst performers in the high risk industries – many of the worst performers [in the energy sector] are coal companies,” Meisingset says.

One of the main challenges for large institutional investors such as Storebrand is the requirement to track a reference or benchmark index means it is often locked into owning assets that might otherwise be seen as unsustainable. Storebrand does not offer ethical funds, since the same sustainability standards are applied to each and every company and sector. “This offers an unprecedented level of security for our clients. No matter which fund or portfolio their assets are invested in, the same high standards apply,” Meisingset says. But Storebrand does screen out tobacco and controversial armaments.

Climate change campaigners praise Storebrand’s move. “This appears to be the time when the moral case for action is joining with the sober thinking that in terms of dollars and cents it’s good business to pull money out from the fossil fuel industry,” says 350.org US managing director Phil Aroneanu. “A bet on fossil fuels is a bet against a sustainable future.”

350.org’s position is that if the world burns more than 565 gigatonnes of carbon it will not stay below the internationally agreed limit of 2C of warming from pre-industrial levels. This of course has dire consequences for large producers such as Australia, which has proven coal and gas resources that would eat up around a third of the entire world’s carbon budget. 350.org backs divestment of fossil fuel assets, but what is often overlooked is it asks for a phased sell-down rather than an overnight sale. Indeed, most divestment plans have little financial impact on the individual fossil-fuel companies. That cannot be said of their reputations.

In a similar vein to Storebrand, Dutch bank Rabobank announced the exclusion of “unconventional energy extraction projects” – typically involving shale gas and oil sands – from its loans portfolio because of the environmental and social implications. The bank, which specialises in financing agriculture and food businesses, has declared fracking of shale gas risks water and soil contamination by the chemicals injected into the shale rocks to extract the gas. Its restriction on loans applies also to farmers who decide to lease their land to energy companies for extraction operations.

Fossil fuel executives are angry at some of the statements made by both ethical and sustainable investors. As reported previously, the chair of the Australian Coal Association Dr Nikki Williams says claims about carbon bubbles and unburnable carbon by activists disregards many important factors. “So, if fund managers are looking to solid, long-term returns on their investments, then divesting from fossil fuel assets will not serve them well,” she says.

Yet even the largest Australian mining companies have already seen the writing on the wall. BHP Billiton has said capital expenditure will decline after 2014 as no new coal projects are planned in Australia beyond those that are already underway. Meanwhile, Rio Tinto has put about $3bn of Australian thermal coal assets up for sale. “This is not exactly a vote of confidence for the future growth of an industry,” UK researchers Carbon Tracker says.

Oliver Wagg is a freelance journalist specialising in sustainable business and investment, renewable energy and climate change science and policy

Source: www.guardian.co.uk