Seventeen U.S. nonprofit grantmaking charities have announced they are divesting from fossil fuel investments. For those new to this world, foundations are typically funded by endowments created by a benefactor or family legacy. These funds are invested, usually in a combination of mutual funds, stocks, hedge funds and bonds. The foundations distribute a portion of the profits as grants and use the rest to pay for operations and reinvestment into the endowment.
As even the most novice investor would tell you, there are many different strategies for investing. However, there is a growing belief that we can do good with our money by choosing investments wisely. By investing in companies that are doing good, we are furthering our own values; be they social, environmental or community-driven. By selling our shares in companies we perceive to be harming things we believe in, we can have a different kind of impact. The latter strategy is called "negative screening" and the former "positive screening".
Negative screening has been in the news a lot lately, in the form of prominent investors "divesting" in particular companies or funds. 350.org, perhaps the most notable grassroots organization fighting against climate change, has led the charge against institutional investments in fossil fuels and other environmentally harmful industries.
Named for the maximum safe concentration of carbon in the atmosphere (350 parts-per-million), 350.org has organized over 500,000 people globally in the fight against global warming. Their latest win is successfully convincing 17 major foundations it was worth shedding their investments in dirty companies. 350.org and their partner gofossilfree.org maintain a list of the top 200 companies that deal in dirty fossil fuels.
So what's the big deal if 17 of the thousands of foundations choose to shift their money? Collectively they manage $1.8 billion in assets. Not much next to Warren Buffet. But quite a hefty amount of money nonetheless.
There is a strong argument from traditional investment advisors that divesting in a particular company has very little (if any) impact on that company's behavior unless it is a magnitude of dollars very few people control. This may be true. But at this point, we are early in the institutional divestment movement and every action sends a message.
Recent efforts to convince the largest institutional investors such as Harvard and Yale to divest in fossil fuels have failed. But the popular opinion is quickly shifting about these dirty fuel sources. Some major donors to university endowments have actually started placing restrictions on their funds, limiting them to clean and/or renewable energy investments only. Now that's putting your money where your mouth is.
Image credit: Seven Days VT