We’ve been hearing about divestment from fossil fuels for a while now, whether it be from university endowment funds (and full or partial divestment), and also featured a story from the Guardian about Bill Gates, who argued that divestment would have little impact, and rather backing green energy and investing in high-risk technologies makes more of a difference in combatting climate change.
In last week’s Opinion pages of the New York Times, Tina Rosenberg describes New York State’s new Common Retirement Fund, which is the United States’ third-largest pension fund and will put $2 billion into a Goldman Sachs investment fund that selects companies to invest in with smaller carbon footprints but have similar risk and return to typical benchmark index funds. From the sound of it, greener investment opportunities will start becoming more common and easily accessible to those of us without Bill Gates levels of money to invest in the higher-risk technologies:
Goldman created the investment fund only for New York State. But similar funds
introduced in 2014 or 2015 are open to other investors, although they have not yet attracted the capital to match New York State’s investment. And more are likely to come — especially after New York’s vote of confidence in a form of green investing that may become mainstream.
“Green investing” to most people still means divestment — selling stock in companies that produce fossil fuels, especially coal, the worst for climate change.
The movement for university divestment has been a great rallying cry and organizing tool for climate activism. As Bill McKibben, the co-founder of 350.org, said, it helps to revoke the social license of fossil fuel companies.
But even McKibben acknowledges that divestment doesn’t affect the stock prices of fossil-fuel companies — and it might not matter even if it did. The companies are so big that divestment has next to no financial impact on them.
It might be a very smart move for investors, however. In the short term, stocks of coal companies, and to a lesser extent, oil companies, are doing terribly. And while in the past, energy stock prices have been cyclical, that may no longer be true, especially with the new emissions goals countries just committed to in Paris. These companies are likely to leave large swaths of their assets in the ground. “Paris is saying that we’re moving to a low-carbon future,” said Mindy S. Lubber, president of Ceres, an organization that mobilizes investment and business leaders to fight climate change. “What is the financial strength of a Chevron or ConocoPhillips in the next 10 years?”
Read the rest of Rosenberg’s original January 5th piece here.
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