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Presentation on fossil fuel divestment and reinvestment in the green economy.
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Divestment & ReinvestmentNov 8, 2014
@timenash
Key Messages
• Anyone Can Do It
• Speak Their Language
@timenash
• No Need to Sacrifice Returns
• Risk Mitigation
Basic Portfolio
Stocks,(60%(
Bonds,(40%(
(assuming 40 years old)
@timenash
Couch Potato Portfolio
http://canadiancouchpotato.com/model-portfolios/
@timenash
Organic Couch Potato Portfolio
Canadian&Equity,&15%&
US&Equity,&15%&
Green&Equity,&15%&
Global&Equity,&15%&
Canadian&Bonds,&30%&
Impact&Bonds,&10%&
Organic(Couch(Potato(Por/olio(
@timenash
Canadian Economy
Epiphany
Fossil Fuel Free PortfolioReal%Estate%2.5%%
Healthcare%5%%
Industrials%5.5%%
Water%5%%
Consumer%Discre;onary%5%%
Consumer%Staples%4.5%%
Technology%7.5%%
Cleantech%4%%
Green%Energy%4%%
Environmental%Services%4.5%%
Financials%10%%Telecommunica;ons%
2.5%%
Canadian%Gov't%Bonds%30%%
Community%Bonds%10%%
Fossil&Fuel&Free&Por+olio&
• Every sector except Energy, Materials, Utilities, Infrastructure
• Includes Green Energy, Water Infrastructure, Cleantech, and Environmental Services
• Also includes Community Bonds offered by solar co-operatives in Ontario (Impact Investments)
Fossil Fuel Free Portfolio
@timenash
Investment Committees
• Different from the Board of Directors
• Financial Decision Makers
• Fiduciary Duty to Maximize Returns
• Status Quo Bias & Risk Aversion
@timenash
Investment Committees
• Usually older men with finance background
• Often volunteer on other boards
• Identify champions, opposers, & swing votes
• Need to connect with them as humans
Objections Handling• Returns Will be Lower
• Loss of Diversification
• What else?
@timenash
Performance• Coal Mining / Oil Sands have been
severely under-performing
S&P 500 (VOO)
Oil Sands (CLO)Coal Mines (KOL)
PerformanceOil Sands vs. Green Energy
Green Energy (QCLN)
Oil Sands (CLO)
***Doesn’t include dividend income***
Risk-Adjusted Returns• Measures of Beta (volatility) ignore systemic risks
• Unburnable carbon is a HUGE systemic risk
• Canadian economy (banks, etc.) is highly exposed
• Committee is putting the endowment at risk
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Diversification
• Modern Portfolio Theory
• Excluding any sector will increase volatility
• Can be offset by investing in alternative energy
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Diversification
• Most boards have zero exposure to emerging green sectors and impact investments. Turn this argument on its head by asking them to better diversify by investing in these sectors!
@timenash
Re-investment
• PowerShares Cleantech Portfolio (PZD)
• iShares Global Water Index ETF (CWW)
• Market Vectors Environmental Services Fund (EVX)
• NASDAQ CleanEdge Green Energy Fund (QCLN)
@timenash
YieldCosLower risk options for investors looking for
income instead of growth
Green Bonds
Compromise• If the board is not ready to divest they
should start by underweight & hedge
• Lower exposure to carbon risk, and hedge by investing in green companies
• This is a win because a large endowment doing this has the same impact as a small endowment divesting