When Portfolio 21 got the call to testify in front of the Oregon State House Energy and Environment Committee on divesting state funds from fossil fuels, we gladly accepted. In an effort to encourage the state to consider divesting funds from fossil fuel holdings, 350 PDX organized a variety of participants to testify on this important topic.
Sandy Polishuk from 350 PDX addressed both the science of climate change and the personal reasons for her effort to pursue divestment as a tactic to highlight the damaging practices of fossil fuel companies, weaken their political standing, and impact their social license to operate.
Christy Splitt of the Oregon League of Conservation Voters discussed her role as coordinator of the Oregon Conservation Network which represents over 40 Oregon conservation organizations in their effort to pass pro-conservation laws. These groups address issues related to climate change on a daily basis across the state.
Walt Eager, a retired engineer with the Oregon Department of Transportation, receives retirement payments from the state Public Employee Retirement System managed by the Oregon Investment Council. As a result of being a participant in the state retirement system, Walt expressed deep concern over his retirement being funded from fossil fuel holdings that threaten his children and grandchildren’s future.
Finally, I spoke of Portfolio 21’s long held rationale for not investing in fossil fuel companies. Our process to identify the most attractive long-term investment opportunities in the global public equity markets seeks to identify global leaders that are most capable of thriving in the economy of the future. We seek to avoid companies that are resisting the changes that are reshaping the economy; those that are involved in business activities that entail what we believe are unacceptable risks in environmental, social or governance areas. As a result, our research has found unacceptable risks in the fossil fuel exploration and production industry and therefore we do not invest in these companies.
One does not need to be a climate activist to find unattractive aspects to investments in the fossil fuel industry. We believe that the long-term risk / reward profile of the sector is unattractive based on known risks within the current operating environment. Portfolio 21 believes it is possible to produce risk adjusted returns that are competitive with appropriate broad market benchmarks through a portfolio that does not invest in fossil fuel companies. In fact, we believe that it is preferable to avoid these companies because of their unattractive risk profile. It is important to note that for those who choose to divest, only about 8% of the global equity market is off limits, leaving 92% of the market available to a portfolio manager to meet their fiduciary responsibility.
For an institutional investor of the size of the state of Oregon, it could take many years to unwind its investments in both public and private fossil fuel holdings. Yet, it is possible to consider a gradual approach that begins with a prohibition on new fossil fuel investments, continues with a commitment to unwinding existing investments in a manner not harmful to the state system participants, and ultimately redirects assets into new fossil free opportunities.
In my personal view, divestment of fossil fuel stocks is not purely an investment strategy, but also a moral one. In my work as research analyst, I spend a great deal of time considering the potential impacts of climate change on the planet, not just the environmental aspects, but the consequences on people around the world. I believe climate change is the greatest challenge of our time--affecting all life on Earth, threatening every society and the natural systems on which they depend. And as Albert Einstein said, “Those who have the privilege to know, have the duty to act.”
Emily is Portfolio 21's Senior Research Analyst and has more than 10 years' experience in the field. She is an experienced environmental professional with a broad base of knowledge in advocacy and policy research.
All investments include risk and have the potential for loss as well as gain. Our investment strategy generally includes investments in foreign securities, which are subject to the risks of currency fluctuations, differing accounting standards, as well as political and economic instability, particularly when investing in emerging markets. Our environmental, social, and governance (“ESG”) policies could cause us to make or avoid investments that may result in underperforming similar portfolios that do not have an ESG policy. Diversification does not assure a profit or protect against a loss.
Portfolio 21 publishes this presentation to convey general information about our firm’s investment philosophy and not for the purpose of providing investment advice. You should consult an advisory representative of Portfolio 21 for investment advice regarding your specific situation.