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