Investing in Carbon Drawdown

A little over one year ago, President Trump reaffirmed his intention to withdraw the United States from the Paris Climate Accord. As if on cue, an iceberg the size of Delaware broke away from the Larsen C ice shelf in Antarctica, where temperatures have risen nearly five degrees on average over the past few decades. And Hurricane Harvey, Hurricane Maria, and Hurricane Florence wrought unprecedented destruction in rapid succession upon Texas, Puerto Rico, and North Carolina, respectively.

Scientists and researchers are still working to measure the astounding human and environmental toll from the hurricanes, which are considered to be climate disasters due to their intensity. Hurricane Maria resulted in nearly 3,000 deaths and left Puerto Rico without electricity, telecommunications, or water services for months. Hurricane Harvey caused at least 100 recorded releases of toxic chemicals in a region with 500 chemical plants and 10 oil refineries. NASA’s satellite images of North Carolina after Hurricane Florence show inky black currents of organic matter—mostly sewage from massive chicken and hog farms in the area—seeping into the blue waters of North Carolina’s coastline.

In response to the president’s willful ignorance of our impending climate crisis, we at Natural Investments have joined thousands of businesses, universities, cities, and other institutions in declaring our commitment to climate action. Although non-renewable energy sources still dominate the energy market, we are working to reduce fossil fuel reliance by advocating for fossil fuel divestment and supporting clean energy investment.

Good News: Fossil Fuel Decline
In encouraging news, energy sector forecasters have been seeing changes. “According to the Energy Information Agency, the U.S. government’s energy-tracking department, 2016 will be the first year coal is not the dominant source of power generation for the U.S. since tracking began in 1950.” Some analysts predict a similar decline for the oil industry.

Just as exciting is the fossil fuel divestment movement around the world, spearheaded by the advocacy group 350.org. A few examples include New York City’s plans to divest $5 billion worth of fossil fuels from pension portfolios, and Ireland announced the country would begin to divest from dirty fuels as well. This slow-but-steady domino effect of institutional divestment has finally brought the first fossil fuel giant, Royal Dutch Shell, to acknowledge in its annual report that the divestment movement is having a material impact on the company’s bottom line. A recent investor report corroborates the sentiment, stating that nearly $7 trillion have been pledged or divested to date, and that the trend is expected to continue.

Even Better News: Renewable Energy Growth
Last month, Capgemini Invent released a report with RE100—a group of businesses committed to 100% renewable electricity—showing that “a sample of 3,500 companies [RE100 businesses] consistently perform better than non-members on two key financial indicators: net profit margin and EBIT margin (Earnings Before Interests and Taxes). The difference is significant (up to 7.7 percentage points) and is true across all sectors (most prominently for IT, telecommunications, construction, and real estate).”

With renewable energy, evidence of a mainstream transition is seen in the investment world as well. U.S. businesses and individuals persist in advancing the sustainable and responsible impact (SRI) investments agenda. A large influx of SRI funding since December 2016 has analysts projecting $8 billion in new investor money for alternative energy infrastructure.

How to Participate
As You Sow Foundation collaborated with Morningstar and other funders to create a database called Fossil Free Funds, giving investors options for mutual funds and ETFs that do not invest in the largest oil, coal, and gas companies. The tool also tracks carbon emissions generated by the listed funds in the capital market. Here at Natural Investments, we offer Fossil Fuel Free model portfolios for those who want to minimize the carbon emission effects of their investments. Contact us with questions on how to use a prudent approach in building wealth that has a positive impact on the world – environmentally and socially. Our advisors can also point to opportunities that go beyond the avoidance of dirty energy and proactively support clean energy technology.

We continue to support investor statements promoting a clean energy world, and when our client portfolio is not fossil fuel free, it is comprised of fund companies that are invested for advocacy purposes to encourage better practices and transition plans for the fossil fuel sector to cleaner technology. All of this activity paves the way for the climate change adaptation moves recommended for the investment world, to build resilient cities in the years to come.

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Sylvia Panek

Sylvia Panek

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