Divestment is the practice of selling a security or group of securities based on principal. Divesting from the fossil fuel industry (coal, oil, and natural gas) is one strategy that concerned individual and institutional investors are using to help reduce carbon emissions, fight climate change, and create positive environmental impact.
Fossil-fuel free investing means more than simply moving your money out of coal, oil, and natural gas producers. After divesting from companies that extract, process, or transport fossil fuels, investors have to determine how to responsibly reinvest those funds. Responsible reinvestment strategies should take the best interests of both the investor and the planet into account.
At Earth Equity Advisors, we are experts in Sustainable, Responsible, and Impact investing (SRI) practices and we follow a strict fossil-fuel free investment policy. We help our clients divest from fossil fuels and reinvest in responsible alternatives. The following information will help you consider the potential impact of divestment and your options when building a fossil-fuel free investment portfolio.
Investing to Curb Climate Change
Climate change is one of the biggest challenges facing humanity and investors can be part of the solution.
Scientists agree that burning fossil fuels for energy is changing our climate. The earth’s climate warmed 1.9° Fahrenheit over the last century (source: NASA) and greenhouse gas emissions caused by burning coal, oil, and natural gas for energy are the leading cause. Unless we figure out how to curb carbon emissions, the environmental impacts of climate change are expected to get much worse. The 2019 report from the Intergovernmental Panel on Climate Change (IPCC) predicts that global temperatures are likely to increase by 2.7°F (1.5° Celsius) before the year 2052. That may not seem like an enormous jump, but the IPCC agrees that this change will lead to life threatening sea level rise and weather events including heat waves and storms.
Divesting from the fossil fuel industry may not directly impact those companies—at least not yet, more on that later—but divesting does free up capital that investors can then put into innovative alternative energy companies and other industries that are working to solve the climate crisis at scale.
Choosing a Green Investment Strategy for Your Portfolio
Many investors that are concerned about global warming look for alternative investment opportunities in renewable or clean energy, but there are a wide variety of responsible investments available across many sectors. A fossil-fuel free portfolio may include investments in:
- Manufacturing efficiencies
- Building efficiencies
- Green building
- Transportation manufacturing
- Battery technology
- Water efficiency
- Water filtration
- Water access
- Sustainable materials
- Higher efficiency HVAC systems
- Minimized use of concrete
- Alternative Energy
- Real estate investment trusts (REITs)–specifically those that own buildings or warehouses and manage them sustainably. Green REITs install energy efficient HVAC systems, water saving technologies, and other environmentally friendly features in large scale projects.
Natural and Organic Foods
- Producers (growers and processors)
- Technologies that increase sustainability
- Internet of Things (IoT)
- Companies that are making their products more energy efficient
Green Community Finance
- Banks that are B corporations
- Insurers who take climate change into account with their underwriting practices
- Banks that cease to fund fossil fuel projects