$1.8bn coalition to divest from fossil fuels, reinvest in clean-tech :: Environmental Finance

Via Environmental-finance.com:

31 January 2014

A coalition of philanthropic funds managing a combined $1.8 billion of assets committed to divest from fossil fuels and increase investments in “the clean energy economy”, in the latest sign that the stranded assets movement is gaining momentum.

As the Divest-Invest initiative launched on Thursday, 17 funds have so far joined its ranks, including the Russell Family Foundation and the Joseph Rowntree Charitable Trust, and others are in the process of signing up “in coming months”.

The campaign, which called onother philanthropic foundations throughout the globe to join its cause, urges funds to divest from fossil fuels and to reallocate those investments in clean energy and other types of clean technology.

Philanthropic funds typically give out about 5% of their assets a year in the form grants to causes they support, but the campaign calls on them to consider environmental factors in their wider portfolios.

“The magnitude of risk of climate change confers that we can no longer conduct business as usual,” said Ellen Dorsey, executive director of the Washington, DC-based Wallace Global Fund, and originator of the initiative. “If we own fossil fuels, we own climate change. Non-profit organisations have an obligation to use our assets to serve the public good.”

The Wallace Global Fund, which reportedly has more than $100 million of assets, started four years ago to divest from fossil fuels and expects to complete the process this year. About 10% of its portfolio is now invested in clean-tech and has “performed excellently”.

Dorsey added that the imperatives to divest are financial as well as ethical because of the risk that fossil fuel assets could be ‘stranded’ if governments bring in tougher legislation to reduce global temperature rises to 2°C.

Another member of the initiative, the Washington State-based Russell Family Foundation, which was founded by the inventors of the Russell Indexes, has already divested from so-called ‘filthy 15’ biggest coal companies in the US.

Its CEO Richard Woo said the decision followed six months of research, and the fund would pursue a “two-fisted approach” by investing more in clean energy.

Olivia Farr, board chair of the John Merck Fund, said the foundation is now “97% divested from fossil fuels and utilities, and 50% reallocated to companies that align with our mission”.

“We believe we have to respond to the crisis of climate change with every asset available or we will not have a liveable planet,” she added. “Our board of directors made a commitment to apply more than just their grant dollars. We can’t rely on policy – we need to move faster than that.”

Wallace’s Dorsey said it was “very significant” that the coalition was issuing a wider call to the philanthropic sector.

“We already know of other foundations that are queuing up to work with their boards and do this – this is just the beginning,” she added.

She said foundations in the US had $650 billion in assets in 2010 and the movement had the potential to spread globally.

“If they all put 5% to 10% of their money in renewables and clean-tech, that’s a significant chunk of the money [we need to transition to a sustainable economy].”

“This movement is on campuses, hospitals and cities and it’s spreading across Europe and Africa. If you look at the role foundations can play, in being out front, it can help this to go mainstream.”

Tom Van Dyck, senior vice-president and financial advisor at RBC Wealth Management, said environmental, social and governance investments were good for the bottom-line in a low-return environment.

“The financial risks of staying invested in fossil fuels are high because two-thirds of proven fossil fuel reserves simply cannot be burned, yet the markets treat this basic physics like it is science fiction,” he added. “Either coal, oil and gas deposits become stranded assets, or we do.”

Peter Cripps