By Janis Hashe
Could climate change be the new apartheid?
In the mid-1980s, a worldwide divestment effort helped create a tipping point. Forced into action by activists—first universities, and then banks and corporations began pulling their investments out of South Africa, in protest of apartheid. By 1990, economic pressure was a major factor in forcing change to a system that had resisted it for half a century.
Today, activists and environmental organizations are increasingly turning to "green" divestment, investment, and legacy giving to put their money where their mouths are. Take, for example, a recent "action alert" from progressive cellphone service provider CREDO that asks its 5.8 million members to urge money-management firm BlackRock to divest from fossil fuels. "To fight climate change, we have to stop the flood of money fueling it," begins the message, calling BlackRock "the world's largest investor in oil, gas, and thermal coal," and noting that it controls more than $6 trillion in assets. Multiple websites, such as www.GoFossilFree.org, provide extensive information both on entities that remain committed to fossil fuels and the many worldwide that are already divesting.
But individual divesting from fossil fuels can involve several actions, including switching from a bank that is heavily invested in those fuels. According to OpenInvest.co, JP Morgan Chase, Goldman Sachs, Citigroup, Bank of America, Morgan Stanley, and Wells Fargo all rank in the top group of American banks continuing, and in some cases even increasing, their support of fossil fuel companies.
In November, the San Francisco Bay Chapter of the Sierra Club hosted a workshop in Albany called "Moving Money to Make Change: Divesting and Planning Your Environmental Legacy." One major recommendation to attendees was switching to local, community-based banks and credit unions.
In a subsequent interview, Rauly Butler, director of retail banking for Mechanics Bank, said Mechanics is an example of a community-based bank that both maintains a policy of not investing in fossil fuels and is able to advise clients on "green" investment/divestment. "It has become a very common request," he said, noting that the bank works with customers investing in mutual funds (typically $500,000 and less) and those requiring wealth management services.
Mutual fund investing, while not as customizable as wealth management, increasingly offers options for socially responsible investments, or SRI, a main driver of which is climate change. Butler added that the most important aspect is to develop a strategy with a financial advisor and review it regularly.
One mutual funds entity that currently offers 27 funds it refers to as "Environmental Social Governance," or ESG, is Calvert. According to Anthony Eames, director of responsible investing strategy, Calvert Research and Management, "Calvert's assets under management have grown in the last year from approximately $12 billion in October 2017 to approximately $15 billion in October 2018." Calvert attributes the growth, he said, in part to changing demographics. "Millennials and women are increasingly influencing financial decisions, and they have expressed heightened interest in responsible investing," he said, pointing to climate change as a major factor.
Yet, despite statistics provided by an Eaton Vance Advisor Top-of-Mind Index Survey that shows 79 percent of the 600 financial advisers surveyed incorporate "responsible investing" into their advice and practices, 54 percent "admitted they don't understand the connection between ESG performance and financial performance." So, clearly, those wanting to divest/invest would be wise to investigate how savvy their financial advisers are in this rapidly changing area.
"Investors are recognizing that they shouldn't have to sacrifice performance to invest this way. So advisors really need to be thinking about how they can help their clients have their values reflected in their portfolios," Eames said.
Berkeley resident Steve Murphy, who attended the Sierra Club workshop, said he's been doing extensive research on green investing, since he is close to retirement age, "but hasn't yet pulled the trigger." He noted, "If you pull back the curtain, you find that some of the so-called SRI funds are still invested in fossil fuels." He said the conversation about how to fight climate change comes up frequently among his peers, and that many acknowledge an economy "tilted to the extraction of fossil fuels" is not sustainable. Murphy will be looking to make investment changes in 2019, and supports the concept of a "Green New Deal," which would multiply investment opportunities.
Local environmental organizations are making it easier for supporters to fight climate change at home, nationally, and globally during their lifetimes, as well as leaving legacies to continue the work. At San Francisco Baykeeper, Executive Director Sejal Choksi-Chugh said the group is "seeing a shift in philanthropy." Not only can outright gifts benefit the organization's ongoing communication, education, science and outreach programs, but "life income gifts" can be structured to provide investment benefits back to the donor during their lifetime.
"Many people are looking for a more active advocacy," she said, noting that Baykeeper's litigation efforts to stop pollution are costly, but vital. For those looking at legacy gifts, she suggested making donations the least restrictive as possible, in order to allow Baykeeper to use the money most effectively. She encouraged those interested in finding out more to arrange to go out on the bay on a Baykeeper cruise to see firsthand the impact the organization has.
Oakland Sierra Club Foundation Executive Director Dan Chu said the club also offers multiple options for supporters, including a planned giving annuity that provides returns for investors. Supporters who want to ensure their legacy gifts go directly to the San Francisco Bay Chapter need to stipulate that intent clearly in their trusts or wills, he said. The foundation is increasingly involved in pro-active measures to counter climate change and created a corporate investor brief, "Protecting the Arctic National Wildlife Refuge from High-Risk Drilling," that generated a May 2018 letter to banks, oil, and gas companies.
"We, the undersigned investors representing $2.52 trillion in assets under management, oppose any efforts to develop oil and gas in the remote and pristine Arctic National Wildlife Refuge in northeast Alaska, and we strongly urge oil and gas companies, and the banks that fund them, not to initiate any oil and gas development in the Arctic Refuge," the letter's introduction reads. This strategy is strikingly similar to the efforts that eventually ended apartheid.
In a nod to what may be part of the financial future, Lisa Barr, director of philanthropic entrepreneurship, Silicon Valley Community Foundation, said via email, "People who have invested in cryptocurrency, such as Bitcoin or Ripple XRP, can transform their assets into positive community impact by using their cryptocurrency to start a charitable fund." Her foundation is accepting donations of cryptocurrency to establish donor-advised funds. "We also can help other nonprofit organizations accept gifts of cryptocurrency, so that their efforts to improve the world can also benefit from the emergence of cryptocurrency," she added.
Calvert's Anthony Eames summed up: "More than half of [financial advisors surveyed] said 'responsible investing' is driving new business to their practices." The climate change message that is being driven home to banks and fossil fuel companies is: It's no longer business as usual. And the drivers, as they were in the anti-apartheid movement's origin, may end up being ordinary people. Perhaps the revolution will be not televised, but financially advised.
The San Francisco Bay Chapter of the Sierra Club is sponsoring another free event for those interested in more information about SRI/ESG investments. Speakers will include Dan Chu and Guillermo Condeso, advancement director, Gift Planning, Sierra Club. Wednesday, Feb. 6, 6:30-8 p.m., YWCA, 2600 Bancroft Way, Berkeley.
Currently there's a rise in "green" divestment, investment, and legacy giving. Photo collage by SpiralA; photo by Kamil Petran