Update on Positive Returns From Divesting and Reinvesting
Walter Whiteley, member of the TSP Climate Justice Group and former TSP Trustee.
Over 3 years ago, TSP voted to divest from Fossil Fuels – based on our social commitments – with the anticipation that we could still obtain good financial returns and better social returns. In the process of reinvesting, TSP Trustees chose Genus Capital Management Fossil Free Funds, including some impact funds, for most of the endowment. We have seen good returns from these investments – and a recent report found that, overall reduced carbon intensive portfolios had lower returns than low carbon portfolios, over the seven years 2010-2017, low carbon intensity improved returns by 9.2% cumulatively.
Genus Capital released their inaugural Carbon Emissions Report this week, , which makes some key findings, relevant to our choices collectively, and individually.
From the Genus report:
“A company’s CO2 emissions, or carbon emissions, is a particularly significant measure for those investors who are concerned about climate change and the environmental impact of their investments. Genus’ inaugural carbon report examines the relationship between carbon emissions, carbon intensity and investment returns. The research team at Genus applied factor analysis to isolate the impact of carbon intensity on a portfolio of global investments (35% S&P/TSX Composite/ 65% MSCI World) between 2010 and 2017.
The research indicated that carbon intensity had a 9.2 per cent cumulative drag on portfolio performance during the seven-year period ending March 31, 2017. Carbon intensity refers to the volume of a company’s carbon dioxide emissions for every million dollars in revenue (USD). ”
Moreover, the report concluded that Canadian companies tend to be among the worst offenders when evaluated based on carbon intensity when compared to other developed world equity markets, owing to the Energy sector’s significant weighting in the Canadian market. “
Put positively, fossil fuel divestment refocuses choices on better performing assets and companies. Also Global markets offer a better range of low intensity stocks and bonds than the Canadian markets.
This Genus research builds on last year’s Fossil Fuel Divestment Report, which compared their own three year returns with the Canadian market. Together, these underscore that investors needn’t sacrifice investment returns to own a portfolio that’s aligned with their values and helps build a low carbon future.
These are exciting and active times for divestment, positive re-investment and new opportunities to learn and act. Here are a few more links:
- For more information on how TSP invests its endowment – see the full list (with links) at http://www.trinitystpauls.ca/faith/board-of-trustees/
- For more general information on alternative investments – check out the TSP Alternative Investments pages at: http://www.trinitystpauls.ca/justice/climate-justice/alternative-investment/
- Institutional Investors demand Companies no longer hide their climate risk: https://www.theglobeandmail.com/report-on-business/rob-commentary/companies-can-no-longer-hide-their-climate-risk/article35288626/
- Marc Carney: Better market information can help combat climate change: https://www.ft.com/content/51e60772-5bf5-11e7-b553-e2df1b0c3220