Jenna Nicholas :
(From previous issue)
It reduces carbon emissions, reduces the need to import fossil fuels, and creates jobs. In 2014, renewable electricity capacity attracted $310 billion of new investment, more than fossil-fuel power plants. Capital can be invested in large-scale renewable power plants (such as wind turbines in the U.S. Midwest), bundles of rooftop solar PV, and through equity investments in technology manufacturers and distributed generation providers.
Three large shifts are happening in personal transportation: 1) the shift from internal combustion engines to electric cars, 2) the increased use of shared vehicles, and 3) a reduction in vehicle miles traveled per year.
Capital can be invested, for example, through equity investments in car manufacturers, or through debt investments in infrastructure (e.g., electric vehicle charging stations).
Energy efficiency
The cheapest way to reduce our fossil-fuel dependence is to reduce the use of energy. The declining cost of sensors and data processing equipment is making energy efficiency even cheaper, while increasing the size of the total potential savings. McKinsey estimated a $1.2 trillion efficiency savings opportunity in the U.S. alone between 2010 and 2020.
Capital can be invested through bundled building efficiency investments, and through equity investments in companies that provide energy efficiency.
Divesting from fossil fuels is a strategy that investors of any size can take to minimize the carbon footprint of their investment portfolio.
And, as illustrated, divested funds can be reinvested in a broad range of financial products that can facilitate a transition to a clean energy economy. If you are interested in divestment there are several actions you can take and many resources available that can help inform your decision-making process:
Learn more about climate change and the divestment movement
Climate change, divestment, and clean energy investments can seem overly complex and confusing-at first. We have collected a handful of useful resources that are a great starting point to better understand the current state of the field.
Over the past few years, several groups have published step-by-step guides on divesting for individuals. These detailed resources not only provide a wealth of background information, but also contain important questions you can ask yourself and your financial advisor. Divestment is only one element in the transition from fossil fuels. For divestment to have a significant impact, it must be on a scale that is relatively large.
Also, divestment is a blunt-edged instrument: investors can choose only between buying, selling, or holding a company’s securities. If a company has operations linked to fossil fuels and clean energy, investors cannot choose to financially support only the clean energy activities. Similarly, divesting from fossil fuel producers who serve as industry leaders in responsible practices could have negative impacts on the fossil-fuel industry’s carbon emissions.
Climate change is the most significant global challenge of our generation. One part of the solution may be reallocating your investment dollars toward creating new solutions.
(Jenna Nicholas is co-founder and CEO of Phoenix Global Impact, a consulting company that specializes in impact investing, social entrepreneurship, and strategic philanthropy.)
