* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
Download Frequently Asked Questions - Divest
Fred Singer wikipedia , lookup
Fossil fuel phase-out wikipedia , lookup
Climate change in Tuvalu wikipedia , lookup
Economics of global warming wikipedia , lookup
Global warming wikipedia , lookup
Climate change and agriculture wikipedia , lookup
German Climate Action Plan 2050 wikipedia , lookup
Climate change mitigation wikipedia , lookup
ExxonMobil climate change controversy wikipedia , lookup
Climate-friendly gardening wikipedia , lookup
Attribution of recent climate change wikipedia , lookup
Media coverage of global warming wikipedia , lookup
Climate engineering wikipedia , lookup
Effects of global warming on humans wikipedia , lookup
Scientific opinion on climate change wikipedia , lookup
Climate governance wikipedia , lookup
Solar radiation management wikipedia , lookup
Climate change in Canada wikipedia , lookup
Climate change in the United States wikipedia , lookup
Climate change, industry and society wikipedia , lookup
Public opinion on global warming wikipedia , lookup
Climate change feedback wikipedia , lookup
Effects of global warming on Australia wikipedia , lookup
Carbon governance in England wikipedia , lookup
Surveys of scientists' views on climate change wikipedia , lookup
Climate change and poverty wikipedia , lookup
Carbon Pollution Reduction Scheme wikipedia , lookup
Carbon capture and storage (timeline) wikipedia , lookup
IPCC Fourth Assessment Report wikipedia , lookup
Citizens' Climate Lobby wikipedia , lookup
Mitigation of global warming in Australia wikipedia , lookup
Low-carbon economy wikipedia , lookup
Frequently Asked Questions What is the Divest-Invest Philanthropy initiative? Divest-Invest Philanthropy is a coalition of U.S. and global foundations pledged to divest from fossil fuel companies and invest a portion of their assets in the clean energy economy. They are calling for other philanthropies to join them. Foundations now join the rapidly growing divestment movement among colleges, cities, states, pension funds, and religious institutions, a moral movement of our time. Divest-Invest Philanthropy believes the fiduciary duty of foundations requires investments not undercut their mission of serving the public good. Grants and investments must be aligned, not in conflict. Divest-Invest also seeks to protect endowments from the “carbon bubble.” Scientists have shown that most fossil fuel reserves must be kept in the ground to protect the climate. As market valuations of fossil-fuel companies are linked to their reserves, this means they are overvalued and risky investments. Foundations in Divest-Invest are confident of comparable or superior returns for their endowment portfolios without fossil fuels, as a number of studies, and real world experience, have demonstrated is readily achievable. And they are committing to help fund the transition to a new, clean energy economy by investing in the many growing opportunities in this sector. Strong returns are coming from sustainable companies across sectors – including power, electricity, water, waste management, energy efficiency, transport, manufacturing, services and food and agriculture. This transition will require one “clean” trillion dollars of new investment globally per year. The fossil fuel divestment movement follows in the footsteps of other efforts to divest from apartheid South Africa and tobacco, which successfully focused ethical and financial power to benefit society. When did the initiative begin? In January 2014, more than a dozen philanthropies with an asset base of nearly $2 billion announced their commitment to divest from fossil fuels and invest in the new energy economy and called on other foundations to join them. The founding members of the Divest-Invest Philanthropy initiative are united around a shared conviction that investments must not undercut philanthropy’s mission to serve the public good. Rather, endowed assets should advance both financial and ethical goals. Who is involved? Divest-Invest Philanthropy was launched by a group of foundations committed to expanding the climate dialogue within philanthropy and acting in solidarity with the exploding fossil fuel divestment movement. The initial cohort represents a wider group of foundations currently moving down the 1 http://www.divestinvest.org/philanthropy [email protected] divestment pathway. An expanding list of committed foundations and philanthropic organizations can be found at www.divestinvest.org/philanthropy. What is the commitment? Foundations have committed to divest from fossil fuel companies and invest a portion of their assets in the clean energy economy. They are committed to move with at a pace equal to the urgency of the crisis. They are asking other foundations to: ASSESS: Conduct an assessment of their exposure to climate change risk, defining the degree to which you are invested in fossil fuels versus climate solutions and investments that support your mission. CONSULT: Launch a dialogue among the Board and Staff on investment strategies that align investments with mission and support a sustainable and just economy. COMMIT: Commit to a timetable and process, commensurate with the pace of climate change, for eliminating all fossil fuels from their investment portfolios while investing in a new, clean energy economy through renewable alternatives, clean tech and other innovations. Why go public with this commitment? Despite universal agreement among climate scientists that the world must move quickly and aggressively in order to avoid severe climate dislocation and safeguard a livable future, the public and private sectors are not responding adequately. In fact, the problem is only growing worse as global emissions continue to climb. Openly declaring philanthropy’s commitment adds critical energy and influence to the escalating divestment movement. It is not about drawing public attention to individual commitments or accomplishments but to call upon philanthropy to have a dialogue about this critical issue of climate risk and to demonstrate that business as usual is no longer an option. Why is this right for foundations? Every foundation’s success depends upon our ability to retain a global climate that is livable. This is true irrespective of whether that foundation is focused on human health, education, human rights, poverty alleviation, equal opportunity, community development, housing, homelessness, scientific research, arts and culture, or the environment. Unabated consumption of fossil fuels will destroy a climate suitable for human civilization and undercut the mission of all philanthropies. Divestment is right for foundations for many reasons, including the following: Fiduciary Responsibility: As long-term investors, foundation endowments need to mitigate the substantial risks presented by climate change and the carbon bubble. Ethical Imperative: Divestment is an ethical choice for institutions that care about communities most vulnerable to climate change, the future viability of our economy and humanity itself. 2 Efficacy: Divesting and investing create the political space for the systemic changes required to level the playing field so that clean technologies can compete fairly in the marketplace. Leadership: By divesting from fossil fuels and investing in climate change solutions, foundations will help lead the transition to a new energy economy. Mission: Foundation investments should support philanthropy’s public purpose and programmatic mission. It is paradoxical for environmental grantmakers to fund climate solutions while investing in companies that are accelerating climate change. However, even for other foundations that may lack a programmatic focus on the environment, the public interest demands consideration of the consequences of climate change on foundation endowments. Investing in dirty energy when profitable investments in clean energy are readily available is irresponsible. What’s more, philanthropies enjoy tax-exempt status precisely because of their social purpose. Investing in the companies that are accelerating climate change is not consistent with that purpose. What is the fossil-fuel divestment movement? Divestment is a tool used by social movements to pressure a government, industry, or company to change, by encouraging a large-scale sell off of securities tied to an offending institution. Divestment sends a strong signal to the target that business-as-usual is no longer acceptable. In essence, divestment undermines a company or industry’s social license to operate. What is the history of divestment movements? Activists used divestment in the 1980s to hasten the dismantling of South Africa’s racist Apartheid regime. The tactic has also been applied to actions targeting repressive regimes or human rights violations in states such as Iran, Sudan, Northern Ireland, Myanmar (Burma) , and Israel. Divestment has pressured industries like tobacco and firearms to make changes in their business practices. Divestment movements empower people and institutions to take action even in the face of government intransigence. Their aim is to foster justice, health and a sustainable future that benefits all of society. Following in the footsteps of historical movements against Apartheid and tobacco, the fossil-fuel divestment movement began on college campuses, and has spread to cities, states, faith communities, hospitals, pension funds, and other institutional investors. Today’s movement creates space for political action by exposing the financial and ethical imperative to divest, while raising awareness about the fossil fuel industry’s efforts to block progress to a clean renewable energy future. Oxford University researchers have called this the fastest-growing divestment movement in history.1 What does “divestment” mean for the Divest-Invest Philanthropy initiative? Divestment means selling the securities of fossil-fuel companies, including any commingled funds with exposure to fossil-fuel stocks and bonds. Some institutions have begun by divesting from a group of “filthy 15” coal companies and then moved to the 200 publicly traded companies with the largest proved reserves of coal, oil and gas.2 3 http://www.divestinvest.org/philanthropy [email protected] The Carbon Tracker Initiative, a UK-based non-profit that has analyzed the financial risks associated with the “carbon bubble,” initially developed the list of 200 targeted companies. In a 2012 report, “Unburnable Carbon,” Carbon Tracker’s team noted that more than two-thirds of current proven carbon reserves held by oil, gas, and coal companies and oil states must ultimately remain in the ground in order for global temperatures to avoid rising more than 2 degrees above pre-industrial levels, a threshold widely recognized by climate scientists as an upper limit of acceptable global warming.3 As policymakers respond to climate change by regulating the sources of greenhouse gas emissions, even in fragmentary ways, these “unburnable” carbon reserves held by fossil fuel companies may become “stranded assets.”4 Divesting from the Carbon Tracker 200 provides investors with a strategy for mitigating the stranded asset risk associated with fossil fuel companies with the largest proved carbon reserves and for attacking their social license to operate in the face of mounting evidence of global climate change. What does “investment” mean for the Divest-Invest Philanthropy initiative? Investment means allocating endowment assets to sustainable, fossil-free investments in climate solutions and the new energy economy. Fossil-free investment opportunities exist across all sectors of the economy and across all asset classes of a diversified investment portfolio, from conventional asset classes such as cash, fixed-income, and public equities (stocks) to alternative asset classes such as hedge funds, private equity, real estate, farmland and timberland, and other commodities and real assets. Investors can invest in clean technology and renewable energy sources such as wind and solar and incorporate environmental, social and governance (ESG) factors into fossil-free investments in other industries, and move their money to more resilient community investing institutions. All portfolios can be readily structured around themes of climate-related strategic asset allocation, carbon risk mitigation, sustainability solutions, and positive environmental impact.5 What are the financial risks of continuing to invest in fossil fuels? There is growing recognition that to maintain a livable climate, the majority of fossil fuel reserves now on the world’s books must be left in the ground. Yet these assets, which must eventually become stranded and unusable, inform the present market price of fossil fuel companies—among the most highly capitalized and profitable businesses on the planet. Financial analyses from PricewaterhouseCoopers,6 Carbon Tracker,7 the London School of Economics,8 Capital Institute,9 Standard & Poor’s,10 and others agree that fossil-fuel security prices are significantly inflated precisely because their value is tied to current reserves that cannot be fully exploited. Conservative estimates suggest a multi-trillion dollar “Carbon Bubble” that would dwarf the recent housing meltdown.11 Smart investors are divesting from legacy fossil fuel assets and investing instead in the clean energy future. 4 How does this contribute to a more sustainable future? Divesting from fossil fuels and investing in climate change solutions — these twin acts create a new investment narrative to accelerate the switch to an economy fueled by clean energy and technology. Investment opportunities in the new clean energy economy are manifold. Strong returns and jobs are opening up in sustainable companies across every sector — including power, electricity, water, waste management, energy efficiency, transport, manufacturing, services, and food and agriculture. Once a foundation makes the commitment, how will you make sure they follow through? The initiative will not be monitoring individual foundations commitments, but aspires to create a sense of accountability around climate change and investment. Together, the signatories form a community of practice, learning from each other’s efforts, sharing strategies, and scaling innovation. What are common misconceptions about fossil fuel divestment? Misconception 1: “Even if all foundations divested, it wouldn’t dent the bottom lines of the fossil fuel companies.” Reality: In the struggle to end Apartheid, divestment was both economically and politically significant, helping to transform the political conditions in which real change could occur. Divestment is a tool that weakens the power of fossil fuel companies over the political process, thereby creating space for real solutions – like a price on carbon – to take hold. Misconception 2: “Fiduciary Duty means we can’t divest.” Reality: In truth, fiduciary duty compels divestment. First, the returns of a divested portfolio meet or surpass a fossil fuel portfolio. Second, a foundation’s Trustees have a clear duty to consider climate change risks and relevant laws and policies in making investment decisions where such matters prove to be material. In fact, failing to do so would be negligent and a breach of duty. Third, fidelity to one’s mission must also be counted as a fiduciary duty of foundations and nonprofits that receive charitable tax status for serving the public good. Misconception 3: “Divestment is too hard and complicated from a financial standpoint.” Reality: It is not hard; it is simply a thoughtful process. Many investors have successfully and profitably divested already. Experienced professionals are available to mentor, advise or manage the process. Misconception 4: “Other methods, like shareholder engagement, work better.” Reality: Shareholder engagement is an inadequate response to the climate crisis – it’s like slowing down from 60 to 50 mph while speeding toward a cliff. Further, it is a tactic that has failed for over a decade to move fossil fuel companies in sustainable directions. Moreover, divestment creates political space for the systemic changes, such as a meaningful price on carbon, required to level the playing field so that clean technologies can compete fairly in the marketplace. However, shareholders should be asking how all companies are managing climate risks and responding to global warming. 5 http://www.divestinvest.org/philanthropy [email protected] Misconception 5: “It’s better to maximize returns through investments so that the money can be used for grants.” Reality: Foundations can divest and achieve superior returns for their endowment. In fact, given the overvalued assets of fossil fuel companies, divesting and reinvesting in carbon-free assets is more fiscally responsible than remaining invested and exposed to what many have termed the “carbon bubble.” Several investment companies have tracked portfolio performance without fossil fuels and found either no difference or a small advantage to fossil-free investments.12 Misconception 6: “Clean tech and renewable energy sources are too volatile and lose money.” Reality: The clean energy industry is growing at nearly double the rate of the overall economy. Meanwhile, dirty energy is getting dirtier: half of the long-term capital spending of the largest fossil fuel companies goes to costly unconventional fuels — like the Alberta tar sands — or deep-water oilfields. These will be the truly volatile assets over time as climate risks become universally acknowledged. Meanwhile, secure climate bonds are growing and multi-year public purchase agreements for power offer stable returns for investors. Misconception 7: “I use fossil fuels in my daily life, so I’m complicit” Reality: Continuing to drive your car simply cannot be compared to the forces that have manipulated the system and constrained consumer and political choice. What’s needed is to make the energy system low-carbon. Divestment creates political space for the systemic changes, such as a meaningful price on carbon, required to level the playing field so that clean technologies can compete fairly in the marketplace. 6 7 http://www.divestinvest.org/philanthropy [email protected] 1 Ansar, Atif, et. al., Oxford Smith School Divestment “Stranded assets and the fossil fuel divestment campaign: what does divestment mean for the valuation of fossil fuel assets?” University of Oxford’s Smith School of Enterprise and the Environment, October 8, 2013. http://www.smithschool.ox.ac.uk/research/stranded-assets/SAP-divestment-report-final.pdf (accessed January 2014). 2 Leaton, James, “Unburnable Carbon – Are the world’s financial markets carrying a carbon bubble?” Carbon Tracker Initiative, March 2012, Figure 5. http://www.carbontracker.org/wp-content/uploads/downloads/2011/07/UnburnableCarbon-Full-rev2.pdf (accessed January 2014). 3 Ibid. 4 Leaton, James, et al., “Unburnable Carbon: Wasted Capital and Stranded Assets,” Carbon Tracker Initiative, 2013, available at http://carbontracker.live.kiln.it/Unburnable-Carbon-2-Web-Version.pdf (accessed January 2014). 5 Joshua Humphreys, “Institutional Pathways to Fossil-Free Investing: Endowment Management in a Warming World,” Tellus Institute, 2013, at http://tellus.org/publications/files/fossilfree.pdf (accessed January 2014); “Resilient Portfolios and FossilFree Pensions,” HIP Investor, September 30, 2013, at http://hipinvestor.com/wp-content/uploads/Resilient-Portfolios-andFossil-Free-Pensions-ByHIPinvestor-GoFossilFree-vFinal-2014Jan21.pdf (accessed January 2014); and “Responding to the Call for Fossil-fuel Free Portfolios,” MSCI ESG Research FAQ, December 2013, at http://www.msci.com/resources/factsheets/MSCI_ESG_Research_FAQ_on_Fossil-Free_Investing.pdf (accessed January 2014). 6 PricewaterhouseCoopers, “PwC Low Carbon Economy Index 2012: Too late for two degrees?” http://www.pwc.com/gx/en/sustainability/publications/low-carbon-economy-index/index.jhtml (accessed January 2014). 7 Leaton, et al., “Unburnable Carbon: Wasted Capital and Stranded Assets.” 8 Leaton, et al., “Unburnable Carbon: Wasted Capital and Stranded Assets.” http://carbontracker.live.kiln.it/UnburnableCarbon-2-Web-Version.pdf (accessed January 2014). 9 Fullerton, John, “The Big Choice: Money or Planet?” The Guardian, October 12, 2011, available at http://www.guardian.co.uk/sustainable-business/blog/carbon-reduction-commitment-finance (accessed January 2014). 10 Simon Redmond and Michael Wilkins, “What a Carbon-Constrained Future Could Mean for Oil Companies’ Creditworthiness,” Standard & Poor’s, RatingsDirect, March 1, 2013, http://www.carbontracker.org/wpcontent/uploads/downloads/2013/03/SnPCT-report-on-oil-sector-carbon-constraints_Mar0420133.pdf (accessed January 2014). 11 Fullerton, John, “Financial Overshoot,” Capital Institute, July 23, 2012. http://capitalinstitute.org/blog/financialovershoot#.UuAGNeQo7WQ (Accessed January 2014); also Flanders, Laura, “How Ivy League Universities are Failing Us on Climate Change,” The Nation, December 4, 2013, http://www.thenation.com/blog/177449/how-ivy-league-universitiesare-failing-us-climate-change# (accessed January 2014). 12 Patrick Geddes, “Do the Investment Math: Building a Carbon-Free Portfolio,” Aperio Group, 2013, available at http://www.aperiogroup.com/system/files/documents/building_a_carbon_free_portfolio.pdf (accessed January 2014).