More investors flock to climate-safe equities 

Source: Benjamin Hulac, E&E reporter • Posted: Friday, December 12, 2014

Wall Street traders may jump into and out of any stock to pursue quick profits, but long-term investing predicated on environmental, social and corporate governance concerns is becoming increasingly common, according to a new report from the Forum for Sustainable and Responsible Investment, or U.S. SIF.

Known collectively by the abbreviations ESG or SRI investing — meaning sustainable, responsible and impacting investing — this strategy has ramped up significantly between 2012 and 2014, with $6.57 trillion of U.S.-domiciled assets at the start of the year now managed using the special criteria.

That figure is up 76 percent, according to U.S. SIF, an association of a variety of ESG-minded investors and stakeholders, from 2012. At the beginning of 2012, there were $3.74 trillion in assets under management that fell under the ESG scope.

“A lot of that growth was from more fairly sizable money management firms,” said Meg Voorhes, director of research and operations for U.S. SIF.

Of the $37 trillion in assets managed in the United States today, about 18 percent is managed under specific ESG guidance, with customer demand driving this growing trend.

This year’s report uncovered “much more activity” on topics specific to global climate change and carbon risk, she said, adding that the authors noted 72 proposals regarding addressing climate change, while the report two years ago uncovered about half as many.

“We’re seeing a doubling of asset vehicles that see climate change as a leading issue,” Voorhes said. “Climate change is the most important specific environmental criterion for institutional investors.”

College fossil fuel divestment campaigns spread to investors

Eighty percent of money managers reported that they followed ESG guidelines to meet client requests, 77 percent said they did so to “help fulfill” a mission, and 76 and 73 percent responded that they did so in order to boost returns or mitigate risk. Of institutional investors, 78 percent replied that they used ESG policies to pursue a mission and 73 percent said they do so to generate a social benefit.

Investors, Voorhes said, appear to be reviewing their portfolios and increasingly questioning if oil and natural gas companies are overvalued, adding that the report omits any investment changes from 2014, such as fossil fuel divestment campaigns.

“We tracked fossil fuel divestment for the first time in this survey,” said Lisa Woll, the chief executive of U.S. SIF.

Growing concern from investors, large or small, over their exposure to carbon risk has driven more investment options for buyers who want to limit or strip fossil fuel companies from their holdings, Woll said. And the fossil fuel divestment push that has sprouted from American college campuses and spread overseas has sparked investors’ interest, she added.

“It empowers and emboldens investors,” Woll said of the fossil fuel discussion, by providing investors with more financial options to build low-carbon or carbon-free portfolios.

Coal, oil and natural gas stocks decline

“Investment consultants are often seen as the gatekeepers,” she said. “I think we’re just seeing increased dialogue and conversation taking place.”

Since 1995, the first year U.S. SIF conducted its ESG trend report, the amount of money under ESG management in the United States has increased or remained roughly steady. Yet the latest report comes at a moment when investing in the traditional energy sector — coal, oil and natural gas firms, which have generally dragged down the third and fourth quarters so far — looks shaky at best.

The Organization of the Petroleum Exporting Countries recently cut back its forecast of how much crude oil it must produce and sell in 2015 to the lowest level in 12 years, lowering its projection by approximately 300,000 barrels a day to 28.9 million barrels a day.

That figure is roughly 1.15 million fewer barrels than the 12-member oil cartel pumped in November.

The Standard and Poor’s 500 Index dropped 1.6 percent yesterday, and January crude oil futures on the New York Mercantile Exchange continued their slide, down to $61.25 as of 6:24 p.m. EST.

Crude oil futures on NYMEX were trading at more than $100 a barrel in June and have remained between about $85 and $103 a barrel from December 2012 until this summer but have plummeted since July.