TheFossilFuelDivestmentLandscape
EricBecker,CFA
CleanYieldAssetManagementNorwich,VermontDecember10,2015
TheCarbonBubble
hDp://fossilfreeindexes.com/2014/05/06/the-allocated-carbon-budget/“UnburnableCarbon2013:Wastedcapitalandstrandedassets.”CarbonTrackerIniTaTveincollaboraTonwithGranthamResearchInsTtuteonClimateChangeandtheEnvironment.
IEA:Tokeepwarming<2°C“65%to80%oflistedcompanies’reservescannotbeburnedunmiTgated.”
TheCarbonBubble
“Infinancialterms,weesTmatethatthevalueofunburnablereservescouldamounttoover$100trillionoutto2050.”–CiTEquityResearch,August2015
TheEconomicIncenTveforAcTon
TheCarbonBudget
SincethereisahardlimittohowmuchcarboncanbeemiDedwithoutcatastrophicresults(bothecologicallyandeconomically),theglobalcommunityismovingtowardimposingacarbonbudget.Thisbudgetentailssignificantrisksforownersoffossilfuelreserves.GeneraTonInvestmentManagementidenTfiestheprimaryrisksas:• RegulaTon(includingmandatesforefficiencyandclean
energy)• MarketForces(e.g.cheapercleanenergy)• SociopoliTcalPressures
Risk/ReturnImpactsofDivestment
USFossilFreeIndexRisk/Return
EAFEFossilFreeIndexRisk/Return
$2.6TrillioncommiDedtodivestmentCOLLEGES/UNIVERSITIESCollegeoftheAtlanTcGeorgetownUniversityGreenMountainCollegeHampshireCollegeNaropaUniversityPitzerCollegePrescoDCollegeSanFranciscoStateUniversityStanfordUniversitySterlingCollegeSyracuseUniversityUnityCollegeCITIESSeaDle,WASanFrancisco,CAPortland,OREugene,ORBerkeley,CABoulder,COSantaFe,NMMadison,WIStateCollege,PAIthaca,NYProvincetown,MAProvidence,RICambridge,MANorthampton,MA
RELIGIOUSINSTITUTIONSUnitedChurchofChrist–NaTonalMassachuseDsUnitedChurchofChristMinnesotaUnitedChurchofChristEvangelicalLutheranChurchofOregonFirstUnitarianChurchofSaltLakeCityFirstParishUnitarianUniversalistChurchinCambridge,MAPortsmouthSouthChurchUnitarianFirstUnitarianChurchofPiDsfield,MEFirstUnitarianSocietyofMilwaukee,WIFirstPresbyterianPaloAlto,CADoverFriendsMeeTng,Dover,NHUnitarianUniversalistSocietyofAmherst,MASocietyforCommunityWorkEpiscopalDioceseofMassachuseDs,MAMaineCouncilofChurches,MEPENSIONFUNDSCaliforniaPublicEmployees’ReTrementSystem(CalPERS)CaliforniaStateTeachers’ReTrementSystem(CalSTRS)CityofProvidence,RIUnitedMethodistChurchGeneralBoardofPensionandHealthBenefits
FOUNDATIONSDivest-InvestPhilanthropicGroupRockefellerBrothersFundSierraClubFoundaTonWallaceGlobalFundJubitzFamilyFoundaTonEducaTonalFoundaTonofAmericaParkFoundaTonRussellFamilyFoundaTonComptonFoundaTonKLFelicitasFoundaTonTheChorusFoundaTonSingingFieldFoundaTonNiaCommunityFoundaTonJohnMerckFundJosephRowntreeCharitableTrustSolidagoFoundaTonJessieSmithNoyesFoundaTonGranaryFoundaTonTheSchmidtFamilyFoundaTonBen&Jerry’sFoundaTonPaxFundThresholdFoundaTon
InvestmentOpTons
Indexeshaverolledoutoverpast18months• S&P500FossilFuelFreeIndex• FTSE/Blackrock–N.AmericaandAll-WorldIndexes• MSCIACWI(AllCountryWorldIndex)• FossilFreeIndexes(FormerS&PexecuTves)
Managedaccounts
• Blackrock(FTSEex-FossilFuelsIndexSeries)• Parametric(FossilFreeIndexesUSandEAFE)• AperioGroup(customscreening)• TrilliumAssetManagement(customscreening)
ETFs
• SPYX–S&P500FossilFuelFreeSPDR–0.20%exp.raTo
Summary
TheCarbonBubblepresentssignificantriskstoowneroffossilfuelreservesaspressureincreasestolimittheburningoffossilfuels.ThereisnoevidenceofareturnpenaltyfordivesTngfromfossilfuelcompanies.Fossilfuelfreeindexreturnsshowcomparableorlowerriskthantheirbenchmarks.436insTtuTonswith$2.6trillioninassetshavecommiDedtodivest.FossilfreeinvestmentopTonsarequicklyemergingforinsTtuTonalinvestors.