A new company, OpenInvest, wants you to use its bots to make your monetary life more ethical. A very popular way to invest in the market is to use index funds, which are a smorgasbord of stocks which will hopefully rise with the stock market as a whole. Most people don’t control what’s in their index fund because it’s managed by a large firm. However, OpenInvest (and others) want you to design your own index fund based on your morals. The fund is created by answering questions and proclaiming what you don’t want to invest in (like arms or mining). The service is only available in the USA at the moment so let’s hope that competitors pop up proving ethical investing like this.
But instead of buying stocks through index funds, as the other robos do, OpenInvest uses individual stocks. Users click through a series of menus to create an “issue profile,” checking boxes to select investment themes—such as gender equality or reduced carbon emissions—as well as groups of companies to exclude. The preset screens lean left. Users can nix weapons manufacturers, tobacco companies, and even those whose executives have backed Donald Trump.
Based on those preferences, OpenInvest creates a basket of more than 60 stocks that both jibes with its customers’ wishes and should, the company says, track the broader market. It balances factors such as size, sector, and each stock’s sensitivity to the market’s ups and downs. OpenInvest says it’s still passive because beating the market isn’t a goal.
Most everyone knows that fossil fuel energy is on its way out and renewable energy usage is accelerating. This means that air quality will improve and energy will become cheaper, all good things. Yet, there’s a large group of companies that don’t see the obvious. Enter the divestment campaign. Divestment campaigns have been around for years and are showing great strides in getting shareholders to take their money from world-destroying industries and put that money into other, friendly, industries.
This year divestment initiatives doubled to $5.2tn! That’s a lot of money leaving oil companies.
The new report, produced by Arabella investment advisors for the DivestInvestcoalition, collated public pledges to sell off some or all fossil fuel investments and added up the overall investments managed by those institutions. The total was double the $2.6tn reported by the last analysis in September 2015.
It is often difficult to calculate the precise proportion of fossil fuel investments in complex funds, but about $400bn of the $5.2tn total is likely to be in coal, oil and gas. Asset managers controlling $1.3tn – a quarter of the total – have also committed to increasing their investments in clean energy to accelerate a transition to the low-carbon economy.
The use of coal to generate electricity is coming to an end, and one of the many reasons coal’s time is up is thanks to divestment. Divestment of fossil fuels has been argued on university campuses for years and started largely as a moral argument that we shouldn’t profit off the reckless destruction of the panel. Since then the movement has evolved to the world of large investment companies because it also makes economic sense.
As global consciousness of the threat of climate change increases there is more and more reason to not invest in the fossil fuel industry. What’s more is that the low price of oil and the successes of renewable energy sources has made the case for divestment stronger.
The divestment movement shares a name and even a bit of the same emotional urgency as the campaign decades ago to get business to pull out of South Africa to press for change in the country’s apartheid system.
“I think that divestment can play the role of accelerating the development that we really need — we really need as fast as possible to get the carbon out of the energy system and divestment is one tool of doing it,” Reverend Henrik Grape of the Church of Sweden said on the sidelines of a conference in the European Parliament. The Church of Sweden decided in 2008 to get rid of its fossil fuel assets.
The movement today can count heavyweight investors like Norway’s sovereign wealth fund, insurance giants Axa and Allianz, major European universities, cities and churches among its supporters. All have made some form of commitment to pull cash from coal assets and, in some cases, other fossil fuels too.
The ongoing process of investment firms divesting from fossil fuels continues to be a good idea for the planet and for profits. It’s worth noting that the big push behind this was a student-led movement to get universities to divest their giant pools of money from unethical investments.
Let’s hope that this continues for many years to come!
* When SRI investment professionals divest of fossil fuel companies, the three places they are most likely to reallocate those investments are: renewable energy companies (59 percent); proportionately across the remaining portfolio (56 percent); and clean technology companies (52 percent). (Respondents were allowed to provide multiple answers to this survey question.)
* Many more survey respondents (61 percent) are concerned about stranded asset risks to investors created by climate change than those who are not (15 percent). Only one in four respondents either dont know about or are unsure about this carbon bubble risk.
Rolling Stone has a great article looking into the logic of divestment, that is the growing trend to remove investments in fossil fuel companies and investing in renewable companies instead. On campuses around the world students have been pushing their schools to put their money where their mouth is by divesting.
It makes sense to do this as a society too. It’s not just because the current economic system is unsustainable but because it also makes economic sense.
For RBF, the logic of divestment was twofold. “There was a very clear moral impetus to do this,” Wayne says. RBF makes significant grants in the field of sustainable development, and the fund reached a breaking point with Big Carbon over what Wayne describes as “the schizophrenic notion that we had investments that were undermining our grants.”
But there was also “an economic reason for divestment,” Wayne says. RBF’s business is philanthropy. It was determined not to damage its portfolio. But as RBF scrutinized its fossil-fuel investments, it began to have concerns. One of the primary assets on an oil company’s books are its “proven reserves” – that is, the oil in the ground and beneath the oceans that will be the source of future profits. RBF questioned the wisdom of parking its money in companies that, in a low-carbon world, would not be able to bring that oil to market – “proven reserves” risked becoming “stranded assets.” RBF also balked at investing in companies that continue spending astronomical funds in the hunt for even more unburnable oil. Exxon Mobil, America’s largest oil company, despite having more than 25 billion barrels of proven reserves, sunk more than $7 billion into new exploration in 2013 alone. “There is no good reason for this vast expenditure of stockholder wealth,” wrote Longstreth. (He has also served as chairman of the finance committee of the Rockefeller Family Fund.) “It is wasted capital,” he continued, “an offense against stockholders in terms financial alone.”