Investments to Fight Climate Change

Investments can be used to combat climate change. Climate change can be addressed using the investment strategy of Sustainable, Responsible, Impact (SRI) investing. SRI is an investment strategy consisting of screening (positive and negative), shareholder advocacy and community investing.

There were several presentation in the 2019 Sustainable, Responsible, Impact investing (SRI) conference about using investments to combat climate change.  I wanted to share some of what was presented along with some investment options.

Using Investments to Combat Climate Change

• With climate change we have three options: mitigate, adapt, and suffer.
• The more we mitigate, the less we need to adapt and the less we will suffer.  If we chose not to mitigate, we’ll need to adapt and suffer more.  Climate change is at the top of the list of impacts for institutional investors.
• The current financial system is causing climate change. We need to improve financial system by investing in companies that are environmentally productive.
• The public equity markets have $80-trillion. Most of that money is invested with only financial impacts. Change will shifting investments to address climate change but it will also require policy and technological developments.
• It is smart to invest with climate change in mind. In the long run it will help your returns. You need to know your exposure to this risk in your investments. There are several tools to do this.
• By divesting and paying attention to the data – companies will become better at addressing climate change. Impact reporting has improved.
• Look at your portfolio and its impact on climate change.
• Climate change not priced into markets. Increasing temperatures and more climate events will negatively impact businesses. There is an equity risk score that shows a company’s exposure to heat stress, hurricane stress, water risk, etc. With these tools you can identify risks and opportunities.
• Short term thinking is a problem. If you look at the long term – all portfolios are exposed to risk from direct physical impacts and transitional risk
• There has been an increase in demand for climate change impact data over the past 2 years.
• Currently, lack of consistent reporting information is a problem. It would be helpful if companies disclosed the location of their assets and types of asset so that risks could be determined.
• Low fossil fuel exposure in a portfolio (and none in coal, heavy oil) will reduce the biggest risks to assets that are tied up and may be stranded if there is a regulation change.
• There is an opportunity to find companies that will benefit from climate change – solar, wind, ….
• The best path forward would be for the government to put on a fee on carbon (or carbon tax) and wait for economics to work out. Alternative energy would become significantly less expensive that fossil fuels.
• It is difficult to figure out the footprint of various investments or different of energy sources. It’s not as easy as saying that alternative energy is all good. For example, copper is important for alternative energy. There needs to be a life cycle analysis

FOSSIL FUEL FREE INVESTMENT OPTIONS

The following is a list of some of the fossil fuel free funds that are available. The first set are mutual funds.  Most of these funds are active with shareholder advocacy.

Ticker              Name                                       Morningstar Category

APPLX           Appleseed Investor                 US Fund World Allocation

REDWX         Aspiration Redwood              US Fund Large Blend

ADJEX           Azzad Ethical                         US Fund Mid-Cap Growth

BAWAX         Brown Advisory Sus Growth US Fund Large Growth

CVMAX         Calvert Emerging Mkts           US Fund Diversified Emerging Mkts

CSIEX           Calvert Equity A                     US Fund Large Growth

DOMIX          Domini Impact Intl Equity     US Fund Foreign Large Value

GCBLX          Green Century Balanced        US Fund Allocation–50% to 70% Equity

GCEQX          Green Century Equity             US Fund Large Growth

MASGX         Matthews Asia ESG Investor US Fund Pacific/Asia ex-Japan Stk

PARNX          Parnassus                                 US Fund Large Blend

PARWX         Parnassus Endeavor Investor  US Fund Large Blend

PFPRX           Parnassus Institutional            US Fund Large Blend

PGRNX          Pax Global Environ Mrkts      US Fund World Large Stock

PAXLX           Pax Large Cap Fund               US Fund Large Blend

PORIX           Trillium P21 Global Equity     US Fund World Large Stock

SSIAX            1919 Socially Respon Bal       US Fund Allocation–50% to 70% Equity

VGSRX          Vert Global Sust Real Estate  US Fund Global Real Estate

Here are some exchange traded funds (ETFs) that avoid fossil fuels. In general, ETFs have lower expense ratios than mutual funds but only follow an index and do not engage as much as mutual funds in shareholder advocacy to change companies.

ETHO            Etho Climate Leader US ETF US Fund Mid-Cap Growth

EAGG            iShares ESG Agg Bond ETF  US Fund Intermediate Core Bond

BGRN            iShares Green Bond ETF        US Fund World Bond-USD Hedged

NUSC            Nuveen ESG Small-Cap ETF US Fund Small Blend

NUBD            Nuveen ESG Agg Bond ETF US Fund Intermediate Core Bond

EFAX             EAFE Fossil Fuel Free ETF    US Fund Foreign Large Blend

EEMX            EmMkts Fossil Fuel Free ETF            US Fund Diversified Emerging Mkts

SPYX            S&P500 Fossil Fuel Free ETF US Fund Large Blend

ALTERNATIVE ENERGY INVESTMENT OPTIONS

The following are individual stocks, ETFs and mutual funds that invest in alternative energy.

AY                  Atlantica Yield PLC

CGAEX          Calvert Global Energy Solutions

CSIQ              Canadian Solar Inc

CWEN           Clearway Energy Inc

CVA               Covanta Holding Corp

EVA                Enviva Partners LP

FSLR              First Solar Inc

FAN                First Trust Global Wind Energy ETF

QCLN             First Trust NASDAQ Cln Edge GrnEngyETF

GRID              First Trust NASDAQ Cln EdgeStGidIfsETF

ALTEX            Firsthand Alternative Energy

YLCO             Global X YieldCo&Renewable Engy Inc ETF

GAAEX           Guinness Atkinson Alternative Energy

HIFR               InfraREIT Inc

PZD                Invesco Cleantech ETF

PBD                Invesco Global Clean Energy ETF

TAN                Invesco Solar ETF

PBW               Invesco WilderHill Clean Energy ETF

PUW               Invesco WilderHill Progressive Engy ETF

GRNTF          iPath Global Carbon ETN

ICLN              iShares Global Clean Energy ETF

CRBN             iShares MSCI ACWI Low Carbon Target ETF

NALFX            New Alternatives A

ORA               Ormat Technologies Inc

PEGI               Pattern Energy Group Inc

SSW               Seaspan Corp

NEXTX           Shelton Green Alpha

SEDG             SolarEdge Technologies Inc

TERP              TerraForm Power Inc

SMOG             VanEck Vectors Low Carbon Energy ETF