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Fossil fuel investments cost major funds billions

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Corporate Knights, together with 350.org and South Pole Group, has launched the Clean Capitalist Decarbonizer, an interactive tool that allows users to determine the financial impact of divesting from carbon heavy companies. Using this first-of-its kind tool, Corporate Knights analysed the investments of 14 funds totaling $1 trillion in assets, including the Gates Foundation and ABP, and determined that the scale of losses over the past three years exceeded US$22 billion.

The analysis covered recent disclosed holdings of 14 prominent funds1 to estimate the potential financial impact had they shifted their investments from the most carbon heavy coal and oil companies 2 and coal-intensive utilities3 to companies that derive at least 20% of their revenues from environmental markets or new energy4. From there, the total returns over a three year period starting on October 1, 2012 were calculated. This coincides with the first full quarter following 350.org founder Bill McKibben’s article in Rolling Stone, which launched the fossil fuel divestment movement.

“The analysis of 14 major funds, based on available data, found that carbon-intensive investments cost investors $22 billion in reduced returns. While incomplete disclosure limits the precision of analysis, the conclusion is unequivocal: decarbonizing portfolio holdings produced a better financial outcome in every case but one,” said Corporate Knights chief executive, Toby Heaps. “It helps explain why a growing group of investors 5  are voting with their dollars for less pollution and more environmental solutions.”

Some funds were found to have substantially higher exposure to carbon heavy companies, while others have quietly reduced, or in some cases completely eliminated, their major holdings exposure to the most carbon-intensive companies and as a result avoided significant financial losses. This comes on the heels of two reports: one from Oxford University which identified the fossil fuel divestment movement as the fastest growing divestment movement in history and wrote that “in almost every divestment campaign (…) from adult services to Darfur, tobacco to Apartheid, divestment campaigns were effective in lobbying for restricting legislation affecting stigmatized firms”. And another by Arabella Advisors, which found that the movement to divest from fossil fuels and invest in renewable energy and climate solutions grew 50-fold in only one year, topping $2.6 trillion in assets under management by institutions and individuals committed to divestment.

“Major funds have consistently outperformed major indices in the last three years, through decarbonizing their portfolios. Our wide coverage with over 40,000 considered companies and our methodology with over 800 approximation models guarantees the accuracy and pertinence of the Clean Capitalist Decarbonizer. We are excited to be part of this initiative,” says Maximilian Horster, Director Financial Services at South Pole Group.

The period of analysis coincides with a tough market for oil and commodity prices, and it is possible that over the next few years, some oil stocks and even coal utilities could partially recover; however, when considering the long-term, it is clear that there is a tenuous business case for remaining heavily invested in carbon intensive industries, as outlined by the Governor of the Bank of England Mark Carney. In failing to divest, institutions risk under-exposure to $3 trillion of public equities positioned to benefit from a more resource efficient and expanding low carbon economy.

“The impact of climate change will be a major investment theme in the next decade and investors who are at the forefront of addressing risks, such as stranded assets in their portfolio construction and security selection process, should be the beneficiaries of stronger long-term risk adjusted performance,” said Christopher Ito, Chief Executive Officer of Fossil Free Indexes. “We are pleased that the Carbon Underground 200TM has become a standard tool for investors as they evaluate their exposure to reserve owning companies. Historical results such as those indicated by the Clean Capitalist Decarbonizer begin to help shape the narrative, but going forward, the impact of climate change and future carbon pricing will likely have a more pronounced impact especially on those reserve owning companies whose business models and strategies are not consistent with the move toward a low carbon economy.”

While this analysis focused on the past three years, dating to the launch of the fossil fuel divestment movement, other analyses over a ten year period by MSCI and Fossil Free Indexes also found fossil free portfolios outperformed.

“The Decarbonizer will provide a deeper level of transparency in the discourse around the investments of some of the world’s most prominent institutions,” said Brett Fleishman, Senior Analyst at 350.org. “The success of the divestment campaign is evidence that the tide is beginning to turn against fossil fuels. When the tool disclosed that the University of Toronto could have generated an excess return — big enough to have paid full tuition for the entire student body for all four years — if they had divested from fossil fuels when the campaign started, the conversation became grounded in the story of the institution itself. Divestment is the moral, prudent, and smart thing to do.”

Energy

Is Wood Burning Sustainable For Your Home?

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sustainable wood burning ideas

Wood is a classic heat source, whether we think about people gathered around a campfire or wood stoves in old cabins, but is it a sustainable source of heat in modern society? The answer is an ambivalent one. In certain settings, wood heat is an ideal solution, but for the majority of homes, it isn’t especially suitable. So what’s the tipping point?

Wood heat is ideal for small homes on large properties, for individuals who can gather their own wood, and who have modern wood burning ovens. A green approach to wood heat is one of biofuel on the smallest of scales.

Is Biofuel Green?

One of the reasons that wood heat is a source of so much divide in the eco-friendly community is that it’s a renewable resource and renewable has become synonymous with green. What wood heat isn’t, though, is clean or healthy. It lets off a significant amount of carbon and particulates, and trees certainly don’t grow as quickly as it’s consumed for heat.

Of course, wood is a much less harmful source of heat than coal, but for scientists interested in developing green energy sources, it makes more sense to focus on solar and wind power. Why, then, would they invest in improved wood burning technology?

Homegrown Technology

Solar and wind technology are good large-scale energy solutions, but when it comes to small-space heating, wood has its own advantages. First, wood heat is in keeping with the DIY spirit of homesteaders and tiny house enthusiasts. These individuals are more likely to be driven to gather their own wood and live in small spaces that can be effectively heated as such.

Wood heat is also very effective on an individual scale because it requires very little infrastructure. Modern wood stoves made of steel rather than cast iron are built to EPA specifications, and the only additional necessary tools include a quality axe, somewhere to store the wood, and an appropriate covering to keep it dry. And all the wood can come from your own land.

Wood heat is also ideal for people living off the grid or in cold areas prone to frequent power outages, as it’s constantly reliable. Even if the power goes out, you know that you’ll be able to turn up the heat. That’s important if you live somewhere like Maine where the winters can get exceedingly cold. People have even successfully heated a 40’x34’ home with a single stove.

Benefits Of Biomass

The ultimate question regarding wood heat is whether any energy source that’s dangerous on the large scale is acceptable on a smaller one. For now, the best answer is that with a growing population and limited progress towards “pure” green energy, wood should remain a viable option, specifically because it’s used on a limited scale. Biomass heat is even included in the UK’s Renewable Heat Initiative and minor modifications can make it even more sustainable.

Wood stoves, when embraced in conjunction with pellet stoves, geothermal heating, and masonry heaters, all more efficient forms of sustainable heat, should be part of a modern energy strategy. Ultimately, we’re headed in the direction of diversified energy – all of it cleaner – and wood has a place in the big picture, serving small homes and off-the-grid structures, while solar, wind, and other large-scale initiatives fuel our cities.

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Energy

7 Benefits You Should Consider Giving Your Energy Employees

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As an energy startup, you’re always looking to offer the most competitive packages to entice top-tier talent. This can be tough, especially when trying to put something together that’s both affordable but also has perks that employees are after.

After all, this is an incredibly competitive field and one that’s constantly doing what it can to stay ahead. However, that’s why I’m bringing you a few helpful benefits that could be what bolsters you ahead of your competition. Check them out below:

Financial Advising

One benefit commonly overlooked by companies is offering your employees financial advising services, which could help them tremendously in planning for their long-term goals with your firm. This includes anything from budgeting and savings plans to recommendations for credit repair services and investments. Try to take a look at if your energy company could bring on an extra person or two specifically for this role, as it will pay off tremendously regarding retention and employee happiness.

Life Insurance

While often included in a lot of health benefits packages, offering your employees life insurance could be an excellent addition to your current perks. Although seldom used, life insurance is a small sign that shows you care about the life of their family beyond just office hours. Additionally, at such a low cost, this is a pretty simple aspect to add to your packages. Try contacting some brokers or insurance agents to see if you can find a policy that’s right for your firm.

Dedicated Time To Enjoy Their Hobbies

Although something seen more often in startups in Silicon Valley, having dedicated office time for employees to enjoy their passions is something that has shown great results. Whether it be learning the piano or taking on building a video game, having your team spend some time on the things they truly enjoy can translate to increased productivity. Why? Because giving them the ability to better themselves, they’ll in turn bring that to their work as well.

The Ability To Work Remotely

It’s no secret that a lot of employers despise the idea of letting their employees work remotely. However, it’s actually proven to hold some amazing benefits. According to Global Workplace Analytics, 95% of employers that allow their employees to telework reported an increased rate of retention, saving on both turnover and sick days. Depending on the needs of each individual role, this can be a strategy to implement either whenever your team wants or on assigned days. Either way, this is one perk almost everyone will love.

Health Insurance

Even though it’s mandated for companies with over 50 employees, offering health insurance regardless is arguably a benefit well received across the board. In fact, as noted in research compiled by KFF, 28.6% of employers with less than 50 people still offered health care. Why is that the case? Because it shows you care about their well-being, and know that a healthy employee is one that doesn’t have to worry about astronomical medical bills.

Unlimited Time Off

This is a perk that almost no employer offers but should be regarded as something to consider. According to The Washington Post, only 1-2% of companies offer unlimited vacation, which it’s easy to see why. A true “unlimited vacation” program could be a firm’s worse nightmare, with employees skipping out every other week to enjoy themselves. However, with the right model in place that rewards hard work with days off, your employees will absolutely adore this policy.

A Full Pantry

Finally, having a pantry full of food can be one perk that’s not only relatively inexpensive but also adds to the value of the workplace. As noted by USA Today, when surveying employees who had snacks versus those who didn’t, 67% of those who did reported they were “very happy” with their work life. You’d be surprised at how much of a difference this could make, especially when considering the price point. Consider adding a kitchen to your office if you haven’t already, and always keep the snacks and drinks everyone wants fully stocked. Doing so will increase morale tremendously.

Final Thoughts

Compiling a great package for your energy company is going to take some time in looking at what you can afford versus what’s the most you can offer. While it might mean cutting back in other areas, having a workforce that feels like you genuinely want to take care of them can take you far. And with so many different benefits to include in your energy company’s package, which one is your favorite? Comment with your answers below!

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