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Invest In the Future - Not in Fossil Fuels

Frances Beinecke

Posted April 29, 2014 in Green Enterprise, Solving Global Warming

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NRDC helps create new tool to get coal, oil and gas out of investment portfolios

Americans are worried about pollution – oil trains running through their towns, fracking in their neighborhoods, coal dust in their air. They’re worried about what the future will look like for their children if carbon pollution continues unchecked.

Wall Street is worried about it too. Under pressure from a growing movement of people who want their money out of fossil fuels, universities, pension investors and foundations are looking to exclude coal, oil and gas stocks from their portfolios. Until now, it could be hard to figure out if investments were free of fossil fuels: Large portfolios like retirement funds invest in multiple companies at once and might put money in oil, gas, or coal. As a result, well-meaning investors might find themselves holding so-called “passive” investments in the very companies they wanted to avoid.

For decades, NRDC has created and supported policies that will ultimately end our reliance on fossil fuels. Today, we are proud to announce that we are working to accelerate that change by helping to create an innovative investment solution that will aid investors who want to keep their money out of fossil fuel companies.

Over the last year, NRDC has partnered with BlackRock and FTSE Group, the global index provider, to launch a groundbreaking stock market index to exclude fossil fuel companies – a new tool that will help ensure that climate-conscious investors can match their financial interests with their values.

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A stock market index helps investors track the performance of a group of stocks. NRDC worked with FTSE to develop comprehensive and transparent methodologies that screen out companies linked to owning, exploring, or extracting fossil fuels. Now, investment companies like BlackRock will use the FTSE index to create low-cost portfolios for customers who don't want to invest their money in fossil fuel companies.

It’s a critical need. Foundations, universities, pension groups, and other major organizations that have wanted to get out of fossil fuel investments have a responsible path to do so – one that will allow them to continue to make money for their clients, but not at the expense of our air, water, and climate.

Over the past six months, 80 percent of new electricity installed in the United States came from renewable energy. We are beginning to replace fossil fuels that endanger our health and climate.

Now, we need others to join us in the fight for a clean energy future. Demonstrating market demand for this index and related investment solutions will help support the growing movement to shift investments away from dirty fuels.

You can help: Tell your university, your company’s pension advisors, your place of worship: It is time to invest in a clean energy future. It is time to invest in our children’s future, and do the work we must do to leave them the world they deserve.

 

Photo credit: Sarah Craig

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Comments

Rebecca CravenApr 29 2014 12:43 PM

Hi Frances - Having an index will make this shift much easier for institutional and small investors alike. I'm curious, though - your blog refers to companies "owning, exploring or extracting fossil fuels." Does that mean that the index may include pipeline companies that do not own the products they transport but have the capacity to do tremendous harm to the environment and public safety? Since its inception, the Pipeline Safety Trust has used a stringent social responsibility filter in investing its endowment by excluding not only extractors, but also transporters. I'd be interested to learn more about this new index and the nature of the filters used in determining what companies may be included. Thanks.

Michael BerndtsonApr 29 2014 02:29 PM

I think this is a great idea and wish this endeavour the best. I'm guessing my alma mater's endowment is pretty much mostly natural resources extraction. I haven't been to mass in, let me see, 2014 minus .....??? I will tell someone about the fund. Once I can figure out who.

Frances BeineckeApr 29 2014 02:48 PM

Great question, Rebecca. Right now, we’re starting with the companies at the front lines of fossil fuel exploration – the oil, gas and coal companies that have proven and probable reserves. Those are the companies with the singular goal of profiting from the extraction of dirty fuels. And if we can leave all the oil, coal and gas in the ground, then we'll be addressing much of the climate, environmental and health impacts that occur during and post-extraction.

Yoni LandauApr 29 2014 10:01 PM

Frances,

Thank you for this post and for your great work! I'm currently working at Yale with the International Center for Finance to launch a Low-Carbon Investing Case Competition. Our competition will bring together MBA's to pioneer strategies for institutional investors to safely move away from the dirtiest stocks. Bob Litterman former head of Goldman's Risk Management will be a lead judge for the competition.

I would be delighted and honored to get a chance to chat with you about the competition.

Yonatan.landau at yale.edu

Paul RacicotApr 29 2014 11:31 PM

Great initiative, but... the shares sold will be bought by others : the process of exploiting fossil fuels will continue, underived. Moving the assets (shares) to a Green Energy Stock Index would better complete the initiative.

Thanks !

Michael BerndtsonApr 30 2014 11:07 AM

Sorry about the double comment - even though I am making it anyway. I just read an article via Midwest Energy News from the Toledo blade:

"Business fears bill will ‘kill solar’ if approved"
Read more at http://www.toledoblade.com/Energy/2014/04/30/Business-fears-bill-will-kill-solar-if-approved.html#t62UfyEtIxdBSJbZ.99

Here's an example of a state government being weird. Ohio is starting to make big dollars extracting fossil fuel from the Utica shale on the one hand and passing legislation to turtle renewables on the other. The Utica shale is located under the Marcellus. Oil and gas is not interested in gas. They are interested in oil. Just like North Dakota's Bakken shale. Any gas collected from fracking wells will probably be flared at 33 percent and sold to market at 66 percent. Assuming Bakken shale wells are a precedent. This isn't a gas for coal thing.

I'm assuming the legislation is focusing on renewable goals and state funding and not outright bans. Yet. Who knows, Ohio may make permitting wind and solar almost impossible. Next.

So here's where NRDC's fund may come into play. Firstly, please excuse my rather aggressive suggestion on how to spend the fund's money. Now with that over, maybe the private sector investments can help renewable ventures in states like Ohio where renewables are getting submarined by legislation. The examples are many. Probably assume most of the states below the Mason Dixon line and those straddling it to the north.

Lauren SteinerMay 1 2014 02:24 PM

This fund is no different than the divestment movement itself. It is just symbolic. Fossil fuel companies don't go to the stock market to make money, they sell their product. And believe me, all of the companies in this fund are using fossil fuels up the yin yang. This is just something to make investors feel good about themselves. If the NRDC is so concerned about getting us off fossil fuels ,why weren't you in Carson, CA the other night testifying in favor of the extension of their moratorium on oil drilling? All five members of the Council passed a 45 day moratorium unanimously last month and the vote was to extend it for ten months so they could do further study. Big Labor sided with Big Oil and bussed in hundreds of workers from out of town and even Jerry Brown, who purports to be a Climate leader, called the Mayor to pressure him to change his vote. They knew that extending this moratorium on all oil drilling even for ten months would have had repercussions throughout the state and the country. On Earth Day, Compton passed a moratorium on fracking and Beverly Hills passed an outright ban. LA City has already directed their city attorney to write a moratorium ordinance. Last night the Monterey County Planning Commission recommended a two year moratorium for their county. And Butte, San Benito, Santa Barbara counties are all putting a fracking moratorium on their ballots. Rather than work with the Wall Street big boys, you should join the activists on the ground. This is where we are going to make the biggest difference.

A Proud CanadianMay 5 2014 09:30 PM

This is a free market society. The best (and only) way to get off of fossil fuels is to develop economic alternatives. Stopping pipelines and extending moratoriums won't do a thing.

This is THE avenue where Joe citizen can help scientists, engineers, and business people make this happen.

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Switchboard is the staff blog of the Natural Resources Defense Council, the nation’s most effective environmental group. For more about our work, including in-depth policy documents, action alerts and ways you can contribute, visit NRDC.org.

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