Fossil fuel-free mutual fund investing came to Canada this spring with the announcement by VanCity Credit Union that one of its affiliated mutual funds had sold off its hydrocarbon holdings to go fossil-free.
Such companies only represented about 3% of the “IA Clarington Inhance Global Equity SRI Class” fund, so it wasn’t too big of a shift. And the phaseout had been long in the planning – predating both this year’s divestment campaign from The Guardian, and last year’s collapse in oil prices.
As explained to CleanTechnica by Dermot Foley, VanCity Investment Management’s Manager of ESG (Environmental, Social and Governance) Analysis:
“We have always been underweight fossil fuels in the Global Fund and looking for profitable alternative energy companies. So the process has been underway for more than a year. The recent fall in oil prices, combined with our own risk aversion led us to re-evaluate the opportunity to completely divest of fossil fuel producers, and to take the next step by committing to remain out of that sector.”
While the entire VanCity Investment Management team is to be commended for their initiative – it’s never easy being first, as suggested by the business expression that “pioneers get arrows in their backs” – Mr. Foley’s career path might personify the evolution of climate advocacy into corporate action.
When Foley worked for the David Suzuki Foundation, a high-profile Canadian environmental science nonprofit, he authored its 2001 report, Fuelling the Climate Crisis, explaining how the country would be better off investing in efficiency and clean-energy innovation rather than gambling on climate-tarring fossil fuel expansion. After a decade’s gestation, the idea is mainstream enough that Canadians (well, those lucky enough to have savings) can buy into a general mutual fund following those principles.
It brings to mind that while it took time for the Rocky Mountain Institute to catch the attention of corporate America, even by 2006, it had helped 80 Fortune 500 companies turn smart sustainability into standard practice.
Engagement vs. Divestment
Setting aside the sinking economics of fossil fuel extractors caught in the carbon bubble, critics of fossil fuel divestment often suggest that engagement would be more productive.
This sounds reasonable, and aligns with most people’s experience: we all know of cases where advocate gadflies made corporate behemoths change their ways. (Cue everyone’s favorite Margaret Mead quotation.)
But when it comes to fossil fuel companies, engagement doesn’t work. That’s straight from Leslie Samuelrich, President of Green Century Capital Management in the United States.
The company’s Green Century Equity Fund held gas company investments through 2014, during which time it tried to engage them on fracking and other issues. But after five(!) fruitless years, Green Century Capital Management threw in the towel. In Leslie’s words:
“We also had spent 5 years working to press gas companies to reduce their use of toxics, protect water supplies and cap their drill caps, but did not meet with much success. We had just co-authored a report scoring fracking companies for simply DISCLOSING environmental issues and every single company failed (Extracting the Facts). And this advocacy was not even getting to their core business – of fracking.”
As an aside, Green Century may have been the first American company to offer a fossil-free general mutual fund in 2005, when the Green Century Balanced Fund, originally set up to avoid nuclear and tobacco, divested from fossil fuels as well.
The lesson might be that engagement can persuade some companies to change how they do business, but engagement will not persuade companies to change what their business is.
Returning to the Canadian perspective, Mr. Foley offered that VanCity Investment Management would continue to engage companies through its two other equity funds, which have “modest investments” in oil and gas. Happily, even there, they draw a line in the (oil) sands:
“…neither fund has any oil sands miners, in recognition of the carbon intensity of the mining and upgrading process as well as the commitment of that industry to expansion.”
Readers at Home & Abroad
While it will take years (maybe — but hopefully not — decades) for worldwide investment allocations to reflect that clean energy is preferable, more promising, and more profitable than fracking fossil formations, every small step gets us a small step closer to where we want and need to be.
American CleanTechnicans who want to learn about fossil fuel–free mutual funds can check out the website of the US Forum for Sustainable and Responsible Investment. It publishes a list of SRI-oriented funds. Readers will have to mouse over the Climate / CleanTech column on the Screening & Advocacy tab to determine which individual funds avoid fossil fuels. (By my count, there are about 1½ dozen.)