Last month I blogged for the second time about climate change and fossil free investing, explaining why I am doing that with my own money. So while I’m on a roll, let’s talk very plainly about why I consider fossil free investing a moral imperative in addition to a prudent way to invest.
What we (you and I and the rest of humanity) are trying to arrest is what we are politely calling climate change; that is, the steadily increasing global temperature rise on the earth’s surface caused by steadily increasing carbon emissions from humanity’s global industrial economy.
The facts really are simple.* Prior to about 200 years ago, the earth’s average temperature had remained remarkably stable for 10,000 years (+/- 1.0 degrees celsius (C)). 10,000 years encompasses the entire historical span of human civilization, from the invention of agriculture until now. In the last 200 years, the industrialization of the human economy has caused the earth’s temperature to rise 0.8 degrees C. That temperature rise is a lagging indicator; that is, it reflects what we have done in the past (50 years back at least). What we are doing now will be reflected in a temperature rise that will occur in the coming decades.
For some time now, the consensus has been the threshold of danger (increasingly severe weather, damaging changes in weather patterns, rising sea levels, species extinction, etc.) for living things on the planet is a rise of 2.0 degrees C. More recent science points to a lower threshold of danger (1.5 degrees C) while at the same time we will almost certainly go past the 2.0 degree mark. Where are we headed? Given current trends in carbon emissions, probably to a rise of 4.0 degrees C by 2100. What will that look like? To quote David Roberts*: Hell on Earth. It will be the hottest the planet has been in 30 million years. Sea levels will have risen 3-6’ globally. 40% of the earth’s land will be in a state of severe drought. As a result, hundreds of millions of people will become refugees, one half of all planetary species will become extinct, and human civilization itself might well begin to unravel. To top it off, positive ecological feedback systems could well render the warming process permanently irreversible. We do not want to go there, but right now we are.
These are hard things to read, even harder to think about. We tend toward denial and feelings of paralysis and helplessness (do you want to stop reading now?). Yet, we CAN change our actions, each one of us, right now, every day. The increase in global carbon emissions must be stopped in the next 5-10 years. It is our economy that is causing these emissions. Our economy is fueled by carbon-based energy (coal, oil, natural gas). It is driven by money. What we do with our money now will change the course of the world. Indeed, it will literally create the world of the future. We still get to choose.
I’m a CPA and an investment advisor. My charge is to help my clients invest their money for their benefit, not for mine. There is a potential conflict of interest here, because I’m well aware that my advocacy of fossil free investing is for my own benefit (and my children’s) as well. Yet research** done so far seems to indicate that fossil free investing will probably have relatively little impact on the long-term performance of an otherwise well-diversified portfolio***. We can do this without hurting ourselves. We might even save ourselves. We still get to choose.
*The title of this piece is taken directly from a recent Ted Talk by David Roberts, a staff writer from Grist.org, entitled, Climate Change is Simple. The factual data mentioned is also taken from this talk. I am indebted to a client of mine who sent me this talk. He knows who he is – thank you.
**The research studies that have been done are necessarily historically oriented. Most start with the past performance of well-diversified portfolios, take out the fossil fuel companies (usually the Carbon Tracker 200 companies) in those portfolios, and re-calculate the past performance of the “fossil free” versions. What they’ve found is that overall performance is affected very little. Of course, past performance by no means guarantees future results.
***Mention of specific companies or securities should not be considered a recommendation to buy or sell that security.