Divestment Convergence Nov. 8 2014
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This document discusses divesting from fossil fuels and reinvesting in sustainable options. It provides several portfolio examples that exclude fossil fuel companies in favor of green energy, clean technology, and environmental sectors. It also addresses common objections to divestment, noting that fossil fuel industries have severely underperformed the market, and that sustainable options can provide comparable or better risk-adjusted returns while diversifying away from systemic climate change risks. The document advocates that investment committees focus on their fiduciary duty by considering these alternatives.
Divestment Convergence Nov. 8 2014
- 1. Divestment & Reinvestment Nov 8, 2014 @timenash
- 2. Key Messages Anyone Can Do It Speak Their Language No Need to Sacrifice Returns @timenash Risk Mitigation
- 3. Basic Portfolio (assuming 40 years old) Stocks,(60%( Bonds,(40%( @timenash
- 4. Couch Potato Portfolio http://canadiancouchpotato.com/model-portfolios/ @timenash
- 5. Organic Couch Potato Portfolio Organic(Couch(Potato(Por/olio( Canadian& Equity,&15%& US&Equity,&15%& Green&Equity,& 15%& Canadian&Bonds,& Global&Equity,& 15%& 30%& Impact& Bonds,& 10%& @timenash
- 7. Epiphany
- 8. Fossil Fuel Free Portfolio Fossil&Fuel&Free&Por+olio& Real%Estate%2.5%% Healthcare%5%% Industrials%5.5%% Water%5%% Consumer%Discre;onary% 5%% Consumer%Staples%4.5%% Technology%7.5%% Cleantech%4%% Green%Energy%4%% Environmental%Services% 4.5%% Canadian%Gov't%Bonds% Financials%10%% Telecommunica;ons% 2.5%% 30%% Community% Bonds%10%%
- 9. Fossil Fuel Free Portfolio Every sector except Energy, Materials, Utilities, Infrastructure Includes Green Energy, Water Infrastructure, Cleantech, and Environmental Services Also includes Community Bonds offered by solar co-operatives in Ontario (Impact Investments) @timenash
- 10. Investment Committees Different from the Board of Directors Financial Decision Makers Fiduciary Duty to Maximize Returns Status Quo Bias & Risk Aversion @timenash
- 11. Investment Committees Usually older men with finance background Often volunteer on other boards Identify champions, opposers, & swing votes Need to connect with them as humans
- 12. Objections Handling Returns Will be Lower Loss of Diversification What else? @timenash
- 13. Performance Coal Mining / Oil Sands have been severely under-performing S&P 500 (VOO) Oil Sands (CLO) Coal Mines (KOL)
- 14. Performance Oil Sands vs. Green Energy Green Energy (QCLN) Oil Sands (CLO) ***Doesnt include dividend income***
- 15. Risk-Adjusted Returns Measures of Beta (volatility) ignore systemic risks Unburnable carbon is a HUGE systemic risk Canadian economy (banks, etc.) is highly exposed Committee is putting the endowment at risk @timenash
- 16. Diversification Modern Portfolio Theory Excluding any sector will increase volatility Can be offset by investing in alternative energy @timenash
- 17. Diversification Most boards have zero exposure to emerging green sectors and impact investments. Turn this argument on its head by asking them to better diversify by investing in these sectors! @timenash
- 18. Re-investment PowerShares Cleantech Portfolio (PZD) iShares Global Water Index ETF (CWW) Market Vectors Environmental Services Fund (EVX) NASDAQ CleanEdge Green Energy Fund (QCLN) @timenash
- 19. YieldCos Lower risk options for investors looking for income instead of growth
- 20. Green Bonds
- 21. Compromise If the board is not ready to divest they should start by underweight & hedge Lower exposure to carbon risk, and hedge by investing in green companies This is a win because a large endowment doing this has the same impact as a small endowment divesting
- 22. Keep it up!! nash@sustainableeconomist.com