What to do About Investments in the Age of Climate Change

September 26, 2016 – For people my age (I’m retired) who are living on income earned from investments and committed to climate change mitigation, how do you make responsible decisions?

Where do you put your money? Balanced mutual funds present a problem because they cover a range of investment categories from energy companies to banks, and from utilities to consumer-focused businesses.

If the companies you invest in are not themselves focused on sustainability and a plan to decarbonize, what resources are available to you to make responsible, positive climate-change focused investment choices?

One organization I recently came across is EIRIS.

The acronym stands for Ethical Investment Research Services. It describes itself as a provider of “environmental, social and governance research” and provides independent analysis and tools for making investment decisions. A signatory to the United Nations Principles for Responsible Investment, it advises more than 200 clients globally. These include pension and retail fund managers, banks, wealth managers, charities and companies.

As part of its services EIRIS provides a three-tool climate change kit that includes:

• Carbon Profile – assesses the management of an investment portfolio for its systematic approach to climate change risks.
• Carbon Risk Factor – puts a number to the climate change risk level within an investment portfolio.
• Carbon Engager – identifies companies at high risk related to climate change issues.

EIRIS points out that current climate change action in general falls far short of what scientists point to as necessary to achieve a sustainable planet. It suggests that investors need to:

• assess the climate change exposure of companies that make up your investment portfolio.
• inform financial advisors to use carbon reduction strategies in choosing stocks, bonds and other forms of investment.
• pick solution companies focused on providing low-carbon alternatives that appear to be viable and sustainable as businesses.
• insist that investments only go to companies providing full carbon disclosure.
• speak to government representatives at all levels about sustainability, emission reductions and instruments whether market-driven or not do tackle carbon, the primary cause of global warming.

Can you as an investor make a difference?

EIRIS argues that indeed you can because when you target investment to companies with transparent decarbonizing and sustainability policies supported by measurable outcomes you impact their global supply chain as well. These are the tens of thousands of small companies that provide supplies and services to large enterprises. Today according to a recent EIRIS study, responsible supply chain management of smaller businesses remains a weak link in addressing sustainability. Only a small minority of large enterprises ask suppliers to demonstrate sustainable management practices focused on carbon reduction.

In my cursory search for fund managers focused on portfolios aimed at sustainable investment and climate change I came up with this short list:

• Access Capital Strategies, Boston, Massachusetts
• Ariel Investments, Chicago, Illinois
• Boston Common Asset Management, Boston, Massachusetts
• Calvert Investments, Bethesda, Maryland
• Clean Yield Group, Norwich, Vermont
• IA Clarington Investments, Toronto, Ontario
• Mawer Investment Management Ltd., Calgary, Alberta
• NEI Investments, Toronto, Ontario
• OceanRock Investments Inc. (Meritas Mutual Funds), Vancouver, British Columbia
• Parnassus Investments, San Francisco, California
• PI Financial Corp (Wolverton Securities), Vancouver, British Columbia
• Trillium Asset Management, Boston, Massachusetts

Note I have not listed banks although many today are developing or have created investment portfolios with a sustainability focus. If you know of others to add to this list please send me your discoveries through comments.

EIRIS has its headquarters in London, UK and Boston, Massachusetts. They are not the only organization providing advice and direction related to sustainabile and responsible investment. You should also check out The Forum for Sustainable and Responsible Investment (US SIF), a Washington, DC-based non-government organization that produces a number of invaluable reports including specific ones focused on investment to curb climate change. And take a look at Bloomberg New Energy Finance for its comprehensive coverage of this subject matter.

A final note.

When speaking with a financial advisor, if questioned about the validity of a climate change and sustainability focused strategy consider seeking new advice from those who understand the challenge that climate change presents for all of us. All of the above may help in that search.