Breaking away from fossil fuels
Catholic groups latest to divest from oil and gas
It’s been described as one of the biggest decisions in the short history of fossil- free divestment. We are referring to this week’s decision by 40 Roman Catholic groups around the world — from organizations in Africa, Australia, Europe, South America and the U. S. as well a number of international bodies — to shun investing in fossil fuels.
While the exact amount of assets that will be affected was not disclosed, the decision, taken by the Global Catholic Climate Movement ( GCCM) was made to demonstrate that the 40 groups were ruling out future investments while urging others to follow suit.
The decision, the GCCM said, was “based on shared value of environmental protection and financial wisdom of preparing for a carbon-neutral economy.”
Wayne Wachell, chief executive at Vancouverbased Genus Capital Management, one of the country’s first fossil- free investment management firms, more than welcomed the news.
“This decision reinforces what we have been saying for the past few years, that the divestment movement is a social movement. The first wave are the churches and value- based organizations and the first wave is about done,” said Wachell, who recently bought a Chevy Bolt e- car. By some estimates about US$ 5.5 trillion of investable assets has been divested.
Wachell created Genus Fossil Free four years back, “to better align the values of our clients with their investments and help address some of the world’s pressing socioeconomic and environmental challenges.” It now has about 25 per cent of its clients’ assets ( it has about $ 1.3 billion under management) invested in fossil- free mandates.
The decision by the 40 Catholic institutions, “will put a lot of momentum behind us,” argues Wachell. “There are a lot of Catholics out there.”
If the churches are part of the first wave of divestment ( two years back the United Church of Canada divested), Wachell argues universities and public institutions are in the second. ( Pension funds are the third wave. Assets owned by faith-based organizations and philanthropic foundations account for 48 per cent of what has been committed to be disinvested.)
Over the winter, Quebec’s Université Laval committed to switch its endowment fund investments in fossil energy to other types of investments. The matter has been raised at other institutions including the University of British Columbia and the University of Ottawa. In other parts of the world a number of universities including, for example, Oxford but not Cambridge, have announced similar divestment plans.
But what about the argument that a well- diversified portfolio requires an allocation to companies in the fossil- fuel business? Naturally enough Wachell has a rebuttal based on three criteria: better returns, better impact and lower risk.
“The returns are good. We have got four years of live divestment and we have beaten all our benchmarks in both the equity funds and the balanced funds,” he said. “We are getting good performance ( relative to our benchmark) and you don’t need hydrocarbons to get performance,” he said. Other institutional investors have adopted a different approach, arguing for divestment and engagement.
But for Genus, fossil- free investing has become the fastest- growing part of its business. “More investors want it, it’s part of the social movement. Investors are becoming more aware. It’s more important to the next generation, the millennial,” he says.
And based on a recent review by D. F. King, an AST company, of the 2017 U. S. proxy season, institutional shareholders have taken up the movement. In that report, D. F. King noted environmental and social proposals “gained traction” with a record number of shareholder proposals. E& S is a mixed bag including climate change, sustainability disclosure, gender pay equity and board diversity.