Posted on September 25, 2014 by David B. Farer
Momentum continues to build as investors and fund managers develop and implement policies and investment guidelines favoring sustainability and clean energy, and disfavoring — and in certain cases shedding — investments in companies that are major producers of carbon emissions and greenhouse gases.
While legislators and regulators continue to grapple with the means to establish and enforce mandates to fight climate change, sectors of the investment community are weighing in by redeploying capital.
Two recent developments illustrate different approaches to investor action on climate change.
In the first, Yale University’s Chief Investment Officer, David Swensen, reportedly issued a letter to Yale’s outside investment managers requesting that they take into account climate change impacts and greenhouse gas emissions in evaluating investment options. Yale’s Investment Office is reputed to oversee the second largest endowment in the U.S., valued last year at close to $21 billion.
The Rockefeller Brothers Fund (RBF), a philanthropy valued at $860 million this year, announced that it is working to divest itself from fossil fuel investments. RBF, which in 2010 had already committed ten percent of the endowment to investments consistent with the goals of its Sustainable Development program, will focus initially on coal and tar sand investments, with the goal of reducing those exposures to less than one percent of the portfolio by the end of the year, while analyzing exposure to remaining fossil fuel investments in order to implement a strategy for additional divestments in the coming years.
The Yale approach stops short of requiring divestment from existing portfolio holdings, and, as reported by the Yale Daily News, Mr. Swensen’s letter came after the Yale Corporation Committee on Investor Responsibility voted against divesting the endowment’s holdings in fossil fuel companies. Still, the Yale paper quoted the letter as stating: “Yale asks its [investment managers] to avoid companies that refuse to acknowledge the social and financial costs of climate change and that fail to take economically sensible steps to reduce greenhouse gas emissions.”
The RBF announcement follows the growing number of individuals and institutions that have determined to sell off their fossil fuel holdings in the last few years. The announcement came a day after more than 300,000 participants gathered in New York City for The Peoples’ Climate March, and a day before commencement of the U.N. climate change summit in New York.
The New York Times cites a report from Arabella Advisors that investors ranging from wealthy individual to pension funds, and from philanthropic and religious organizations to local governments, have committed to divesting over $50 billion in fossil fuel investments and to turning to investments in cleaner energy.
Socially responsible investment strategies are nothing novel; funds dedicated to such benchmarks have been around for years. But as the Times article pointed out, it is notable that the latest reported entrant in the fossil fuel divestment trend is a fund established by a family whose wealth was substantially derived from the oil industry.