Matt Patsky, CFA, CEO, Trillium Asset Management
In the past year or so, following Bill McKibben’s compelling Rolling Stone article, Global Warming’s Terrifying New Math, there has been a renewed focus on this issue of climate change in the Sustainable and Responsible Investing (SRI) industry.
There is broad consensus that our planet is warming and that humans, through the burning of fossil fuels, are significant contributors. In 2009, 167 countries signed the Copenhagen Accord, agreeing that, in order to prevent catastrophic environmental damage, actions must be taken to prevent the temperature from rising more than 2 degrees Celsius.
It is clear to me that climate change is the defining investment issue of our generation. Damage to the environment, economy, homes, and lives isn’t a threat for future generations. It is happening today.
On June 25, President Obama directed the Environmental Protection Agency to move forward with regulations to limit carbon emissions from existing coal and gas-fired utilities. By some estimates, the oil and gas industry owns five times as much fossil fuel than is safe to burn. The president also proposed a 30% increase in funding for clean-energy technology for 2014. These are two important steps, but federal action alone is not enough.
What actions should SRI investors take to be an effective part of the solution? We at Trillium, and our colleagues across the planet, have been contemplating this difficult question.
As you likely know, Trillium has been managing fossil fuel-free investment portfolios for several years. The Green Century Balanced Fund, which Trillium sub-advises, has been fossil fuel free since 2005. In early 2008, we launched our Sustainable Opportunities Strategy with the goal of proactively identifying companies that provide solutions to growing global sustainability challenges. The strategy has been the fastest growing in the history of the firm and has been fossil fuel free since its inception.
In our other investment strategies, we invest in fossil fuel companies that are exhibiting the best environmental practices. Fossil fuel investment in these strategies represents less than 5% of Trillium’s total assets under management as of June 30, 2013, with no exposure to companies with significant operations in coal or tar sands.
As shareholders in these companies, we work closely with Ceres, the Interfaith Center on Corporate Responsibility, the Investor Environmental Health Network, and other social investors on many issues including climate change, toxic chemicals and emissions, water scarcity, environmental justice, and reducing the impacts of unconventional oil and gas extraction (e.g., hydraulic fracturing, oil sands). Our dedicated team of environmental, social, and governance (ESG) advocacy experts are involved in high-level discussions with dozens of the most influential companies in the U.S., sometimes as a direct result of shareholder resolutions that we file at the companies.
At Trillium, we continue to assess whether the benefit of a complete divestment from fossil fuel outweighs our success in moving extractive industries toward more sustainable business practices.