Daily Management Review

What a responsible investor should do to prevent climate change


05/29/2015


Institutional investors around the world — including pension funds, insurance companies, charity foundations and universities — fight against a problem of a divestment oil and the coal-mining companies. Of course, climate change is the reason: in case if we do not sharply reduce consumption of fossil fuel or not to stop it completely in favor of energy of zero carbon, such as solar energy by 2070 — the world will suffer from the unacceptable risks connected with the global warming provoked by manhood.



Paul Weiskel/Corbis
Paul Weiskel/Corbis
Institutional investors around the world — including pension funds, insurance companies, charity foundations and universities — fight against a problem of a divestment oil and the coal-mining companies. Of course, climate change is the reason: in case if we do not sharply reduce consumption of fossil fuel or not to stop it completely in favor of energy of zero carbon, such as solar energy by 2070 — the world will suffer from the unacceptable risks connected with the global warming provoked by manhood.

For several reasons the only answer is the divestment. It’s about a personal interest: investments into fuel industry will be bad investments in the environment which is resolutely displaced towards renewables.

Moreover, the divestment will help to accelerate this transition, hunger of the investment capital branch— or, at least, increase the cost of the capital for the firms which are carrying out irresponsible development, and also investigation of oil, gas and coal despite an imperative need to reduce it. One institutional investor cannot have essential value, yet hundreds of large investors owning assets in trillions of dollars, certainly, can.

Really, the leading investors divestment sends a powerful signal to the whole world that climate change is too dangerous to accept further delays in the course of transition to the low-carbon future. Of course, the it is not the only way, but the most effective.

At last, investors can reduce investments for moral reasons. Many investors do not want to be connected with the industry responsible for potential global disaster, especially it goes for the companies, which throw the money and influence against important actions for fight against climate change. For the same reasons, many investors do not want to deal with arms manufacturers or the tobacco companies and their portfolios.

Nevertheless, there is both an ethical responsibility and practical alternative of the divestment which can help to direct the oil-mining companies to the low-carbon future as active shareholders and institutional investors can use the property right (and, in case of large investors, the public voice) to help to convince the companies to accept policy of protection of climate.

The American universities are on the advanced line of this discussion, to it they were brought by students who are too young to face crisis of climate change in the next decades. Students have the right to be disappointed with that the majority of university donations were still passive in this question, without refusing and without being attracted as active investors. For example, the president of Harvard university Drew Gilpin Faust sharply rejected a divestirovaniye in 2013. She claimed that the purpose of fund of Harvard university is financing of scientific activity of university. Though she considers that Harvard will be the active and responsible shareholder, she did not provide any details about what it will be.

Harvard and many other universities (including the Columbia University) seek to work as responsible investors for a long time. In some, there are committees advising university trustees on environmental issues, sociology and managements (ESG) and problems of their portfolios, most often, when absentee voting in support of ESG offers has to be taken. But still, very few people apply in holdings the principles of ESG on operation of fossil fuel of their natural and resource potential.

Of course, the need for fight against climate change does not stop with investors: the morate of steady consumption by natural persons and productions by legal also has to become part of the decision. Transition to safe, low carbon future demands that all parts of society work responsibly and providently. As leaders in the field of education, scientific researches and solutions of problems, universities have unique responsibility and opportunity to direct, including responsible and ethical investors.

based on 'The Responsible Investor’s Guide to Climate Change' by Jeffrey D. Sachs and Lisa Sachs






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