Going Fossil Fuel Free and divesting of fossil fuel stocks is an end game for some, but for Portfolio 21 it is simply the first─and easiest─step. The next step is to consider how to reallocate those funds. It goes without saying, you wouldn’t want to rid your portfolio of fossil fuel companies, only to fill it with corporations that are “gas guzzlers.” Fossil Fuel Free Investing becomes a complete story only when done in conjunction with energy efficiency analysis and renewable energy sourcing.
Portfolio 21 has produced a white paper, Beyond Fossil Fuel Free Investing: Reducing Global Energy Demand through Efficiency, which summarizes some of our research on the global energy system. The report covers energy usage, sources, and opportunities for achieving increased efficiency throughout many of the world’s regions in which we invest.
Another report published recently, the Natural Resources Defense Council’s First Annual Energy and Environment Report, is limited to a U.S. view and may paint a rosier picture of where we are in terms of achieving goals than Portfolio 21’s view. But it nonetheless presents a powerful case for the critical role of energy efficiency.
The Fossil Fuel Free investing movement and the associated worldwide divestment campaign is well aligned with Portfolio 21’s mission and investment approach. Portfolio 21 has a long history─long before the current movement spearheaded by Bill McKibben and 350.org got started─of managing fossil fuel free portfolios, including our Global Equity Strategy and the mutual fund we advise. We believe in this divestment movement and are happy to see the momentum behind it. And frankly, it has been good for our business, as institutions and private investors have come to us to manage fossil fuel free portfolios post-divestment.
That said, and with all due respect, I have to point out that divesting one’s portfolio of fossil fuel stocks is at best a half measure because it only deals with the supply side of the energy and carbon story. Obviously, the world runs on energy, the world’s population is growing and the percentage of the population that consumes energy is also growing. It is of critical importance to recognize these hard facts and deal aggressively with the demand side of the energy equation in our daily lives as well as in any investment portfolio that attempts to achieve a mission associated with fossil fuel free investing.
The demand side of the energy equation is where we at Portfolio 21 spend our time and where we conduct in-depth research at the company, country, and regional level. The first level questions are simple:
--Where does a company source its energy─fossil fuels or renewables?
--Is the company using leading edge, best available technology to become more efficient throughout its operations?
--Does the company’s product/service suite offer leading edge energy efficiency advantages?
--What is the company’s history of reducing energy use and greenhouse gas emissions and what are its goals?
Our research becomes more detailed if a company remains of interest after our first level of analysis. And the differences between companies’ approaches in similar businesses are fascinating. We are, of course, seeking the global leaders in energy efficiency and clean energy utilization.
Here is the amazing point: the opportunity to reduce energy use and greenhouse gas emissions through the adoption of existing energy efficiency measures is staggering. In the industrial sector alone, use of best available technology is estimated to have the potential to reduce energy use by the equivalent of taking 40% of the world’s auto fleet off the road, which is also the equivalent of 8 times the current installed worldwide wind energy generating capacity.
Again, we support fossil fuel free investing, Bill McKibben, 350.org, and their mission. For Portfolio 21, as a well-known expert practitioner of fossil fuel free investing, this is the easy step, the starting point. And we want to make clear that there are large and immediate opportunities to make our world a better place through energy efficiency.
John Streur is President of Portfolio 21. He has 25 years of experience in the field of investment management.