This document discusses divesting from fossil fuels and reinvesting in sustainable options. It provides several portfolio examples that exclude fossil fuel companies in favor of green energy, clean technology, and environmental sectors. It also addresses common objections to divestment, noting that fossil fuel industries have severely underperformed the market, and that sustainable options can provide comparable or better risk-adjusted returns while diversifying away from systemic climate change risks. The document advocates that investment committees focus on their fiduciary duty by considering these alternatives.

1. Divestment & Reinvestment
Nov 8, 2014
@timenash

2. Key Messages
• Anyone Can Do It
• Speak Their Language
• No Need to Sacrifice Returns
@timenash
• Risk Mitigation

3. Basic Portfolio
(assuming 40 years old)
Stocks,(60%(
Bonds,(40%(
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4. Couch Potato Portfolio
http://canadiancouchpotato.com/model-portfolios/
@timenash

5. Organic Couch Potato
Portfolio
Organic(Couch(Potato(Por/olio(
Canadian&
Equity,&15%&
US&Equity,&15%&
Green&Equity,&
15%&
Canadian&Bonds,&
Global&Equity,&
15%&
30%&
Impact&
Bonds,&
10%&
@timenash

6. Canadian Economy

7. Epiphany

8. Fossil Fuel Free Portfolio
Fossil&Fuel&Free&Por+olio&
Real%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%%
Canadian%Gov't%Bonds%
Financials%10%%
Telecommunica;ons%
2.5%%
30%%
Community%
Bonds%10%%

9. Fossil Fuel Free Portfolio
• 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)
@timenash

10. Investment Committees
• Different from the Board of Directors
• Financial Decision Makers
• Fiduciary Duty to Maximize Returns
• Status Quo Bias & Risk Aversion
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11. 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

12. Objections Handling
• Returns Will be Lower
• Loss of Diversification
• What else?
@timenash

13. Performance
• Coal Mining / Oil Sands have been
severely under-performing
S&P 500 (VOO)
Oil Sands (CLO)
Coal Mines (KOL)

14. Performance
Oil Sands vs. Green Energy
Green Energy
(QCLN)
Oil Sands
(CLO)
***Doesn’t include dividend income***

15. 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
@timenash

16. Diversification
• Modern Portfolio Theory
• Excluding any sector will increase volatility
• Can be offset by investing in alternative energy
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17. 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

18. 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

19. YieldCos
Lower risk options for investors looking for
income instead of growth

20. Green Bonds

21. 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

22. Keep it up!!
nash@sustainableeconomist.com