The Facts About Fossil Fuel Divestment
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The Turtle Becomes the Hare the Implications of Artificial Short-Termism for Climate Finance
THE TURTLE BECOMES THE HARE THE IMPLICATIONS OF ARTIFICIAL SHORT-TERMISM FOR CLIMATE FINANCE DISCUSSION PAPER – OCTOBER 2014 1. INTRODUCTION 2°INVESTING INITIATIVE A growing narra@ve arounD short-termism. A The 2° Inves@ng Ini@ave [2°ii] is a growing chorus of voices have argued that the mul-stakeholder think tank finance sector suffers from ‘short-termism’ – working to align the financial sector focusing on short-term risks and benefits at the with 2°C climate goals. Our research expense of long-term risk-return op@mizaon. and advocacy work seeks to: While the academic literature behind this narrave • Align investment processes of financial instuons with 2°C has enjoyed a renaissance since the 1990s, the climate scenarios; global financial crisis and its aermath triggered a • Develop the metrics and tools to new focus on the issue, by academics, measure the climate performance of policymakers, and financial ins@tu@ons themselves. financial ins@tu@ons; • Mobilize regulatory and policy Impact of short-termism. The new focus has placed incen@ves to shiJ capital to energy par@cular emphasis on short-termism as a cause of transi@on financing. the global financial crisis. In this role, short-termism is seen to have taken long-term (or even medium- The associaon was founded in term) risks off the radar screen. Short-termism is 2012 in Paris and has projects in Europe, China and the US. Our work also blamed for models that extrapolated beyond is global, both in terms of geography short-term factors and were built with limited and engaging key actors. -
Is the International Role of the Dollar Changing?
Is the International Role of the Dollar Changing? Linda S. Goldberg Recently the U.S. dollar’s preeminence as an international currency has been questioned. The emergence of the euro, changes www.newyorkfed.org/research/current_issues ✦ in the dollar’s value, and the fi nancial market crisis have, in the view of many commentators, posed a signifi cant challenge to the currency’s long-standing position in world markets. However, a study of the dollar across critical areas of international trade January 2010 ✦ and fi nance suggests that the dollar has retained its standing in key roles. While changes in the global status of the dollar are possible, factors such as inertia in currency use, the large size and relative stability of the U.S. economy, and the dollar pricing of oil and other commodities will help perpetuate the dollar’s role as the dominant medium for international transactions. Volume 16, Number 1 Volume y many measures, the U.S. dollar is the most important currency in the world. IN ECONOMICS AND FINANCE It plays a central role in international trade and fi nance as both a store of value Band a medium of exchange. Many countries have adopted an exchange rate regime that anchors the value of their home currency to that of the dollar. Dollar holdings fi gure prominently in offi cial foreign exchange (FX) reserves—the foreign currency deposits and bonds maintained by monetary authorities and governments. And in international trade, the dollar is widely used for invoicing and settling import and export transactions around the world. -
Divestment May Burst the Carbon Bubble If Investors' Beliefs Tip To
Divestment may burst the carbon bubble if investors’ beliefs tip to anticipating strong future climate policy Birte Ewers,1;2;∗ Jonathan F. Donges,1;3;∗;# Jobst Heitzig1, Sonja Peterson4 1Potsdam Institute for Climate Impact Research, Member of the Leibniz Association, P.O. Box 60 12 03, 14412 Potsdam, Germany 2Department of Economics, University of Kiel, Olshausenstraße 40, 24098 Kiel, Germany 3Stockholm Resilience Centre, Stockholm University, Kraftriket¨ 2B, 114 19 Stockholm, Sweden 4Kiel Institute for the World Economy, Kiellinie 66, 24105 Kiel, Germany ∗The first two authors share the lead authorship. #To whom correspondence should be addressed; E-mail: [email protected] February 21, 2019 To achieve the ambitious aims of the Paris climate agreement, the majority of fossil-fuel reserves needs to remain underground. As current national govern- ment commitments to mitigate greenhouse gas emissions are insufficient by far, actors such as institutional and private investors and the social movement on divestment from fossil fuels could play an important role in putting pressure on national governments on the road to decarbonization. Using a stochastic arXiv:1902.07481v1 [q-fin.GN] 20 Feb 2019 agent-based model of co-evolving financial market and investors’ beliefs about future climate policy on an adaptive social network, here we find that the dy- namics of divestment from fossil fuels shows potential for social tipping away from a fossil-fuel based economy. Our results further suggest that socially responsible investors have leverage: a small share of 10–20 % of such moral investors is sufficient to initiate the burst of the carbon bubble, consistent with 1 the Pareto Principle. -
Project Finance Course Outline
PROJECT FINANCE COURSE OUTLINE Term: Spring 2009 (1st half-semester) Instructor: Adjunct Prof. Donald B. Reid Time: Office: KMEC 9-95, 212-759-5655 Classroom: Email: [email protected] Admin aide: Contact: [email protected] Background Project finance is used on a global basis to finance over $300 billion of capital- intensive projects annually in industries such as power, transportation, energy, chemicals, and mining. This increasingly critical, financial technique relies on non- recourse, risk-mitigated cash flows of a specific project, not the balance sheet or corporate guarantee of a sponsor, to support the funding, using a broad-based set of inter-disciplinary skills Not all projects can support project financing. Project finance is a specialized financial tool necessitating an in-depth understanding of markets, technology, sponsors, offtakers, contracts, operators, and financial structuring. It is important to understand the key elements that support a project financing and how an investor or lender can get comfortable with making a loan or investment. Several industries will be used to demonstrate project-financing principles, with emphasis on one of the most important, power. Objective of the Course The purpose of the course is to understand what project finance is, its necessary elements, why it is used, how it is used, its advantages and its disadvantages. At the end of the course, students should be able to identify projects that meet the essential criteria for a project financing and know how to create the structure for a basic project financing. The course will study the necessary elements critical to project financing to include product markets, technology, sponsors, operators, offtakers, environment, consultants, taxes and financial sources. -
$1.5 Billion Lost on Tar Sands and Fracking Holdings
$1.5 billion lost on tar sands and fracking holdings New York State Common Retirement Fund has lost more than $1.5 billion on just 16 fossil fuel companies in the last year Highlights: ● $1.5 billion loss on 16 companies since March 31, 2019 ● 60% drop in value ● Value of tar sands holdings has dropped by 57% from $2 billion to $850 million ● Value of major fracking holdings down 84% ● Exxon investment has dropped below base cost - a loss of over $500 million in 1 year ● S&P 500 Energy companies have consistently underperformed the rest of the market over 1, 3 and 5 year time horizons ● Market value were down double digits even before the oil crash 60% drop in value of holdings in just a year The New York State Common Retirement Fund (Fund) has lost more than $1.5 billion on just 16 oil and gas stocks over the last year as the energy sector faces increasing volatility and declining prospects, according to a new analysis by 350.org1. New York State Comptroller Thomas DiNapoli, the sole custodian of the Fund, has so far refused to divest from fossil fuels. The Fund serves as the retirement fund for more than 1 million New Yorkers and its oil and gas holdings have left it overexposed to the precipitous drop in energy stocks over both the past month and year. At the end of March 2019, the Fund had more than $13 billion invested in fossil fuel companies. While government stimulus may trigger a slight rebound in the coming days, most analysts agree the overall outlook for the sector is dim. -
Derivative Securities
2. DERIVATIVE SECURITIES Objectives: After reading this chapter, you will 1. Understand the reason for trading options. 2. Know the basic terminology of options. 2.1 Derivative Securities A derivative security is a financial instrument whose value depends upon the value of another asset. The main types of derivatives are futures, forwards, options, and swaps. An example of a derivative security is a convertible bond. Such a bond, at the discretion of the bondholder, may be converted into a fixed number of shares of the stock of the issuing corporation. The value of a convertible bond depends upon the value of the underlying stock, and thus, it is a derivative security. An investor would like to buy such a bond because he can make money if the stock market rises. The stock price, and hence the bond value, will rise. If the stock market falls, he can still make money by earning interest on the convertible bond. Another derivative security is a forward contract. Suppose you have decided to buy an ounce of gold for investment purposes. The price of gold for immediate delivery is, say, $345 an ounce. You would like to hold this gold for a year and then sell it at the prevailing rates. One possibility is to pay $345 to a seller and get immediate physical possession of the gold, hold it for a year, and then sell it. If the price of gold a year from now is $370 an ounce, you have clearly made a profit of $25. That is not the only way to invest in gold. -
Ad Hoc Committee on Fossil Fuel Divestment Report
TO: Tilak Lal, Chair, Joint Committee on Investments; Vice Chair, Rutgers University Board of Trustees J. Michael Gower, Executive Vice President and Chief Financial Officer, Rutgers University FROM: Ad Hoc Committee on Fossil Fuel Divestment SUBJECT: Divestment of the Rutgers University Endowment from Fossil Fuel Investments DATE: February 22, 2021 Introduction In spring 2020, the Joint Committee on Investments, which sets overall policy for the investment of the Rutgers University endowment, received a request from a student group called the Endowment Justice Collective to divest from fossil fuels. The chair of the Joint Committee on Investments and the university’s chief financial officer made a preliminary determination that the students’ request appeared to meet the standards outlined in the Advisory Statement on Divestment within the university’s Investment Policy. As prescribed by this policy, an ad hoc committee composed of faculty, students, and staff was charged to consider the divestment request based on university policy and to make recommendations based on its review.1 Fossil Fuels in the Rutgers University Endowment The Ad Hoc Committee defined fossil fuel investments as investments in any company or fund whose primary business is the exploration or extraction of fossil fuels, including coal, oil, and natural gas, or whose primary business supports this sector with infrastructure and other services. This definition is consistent with the nature of the divestment request received in spring 2020. Currently, approximately 5% of the university’s $1.5 billion endowment consists of fossil fuel investments. Sixty percent of these investments are in private funds, with the remainder in public equity or fixed income funds. -
Climate Change: Active Stewardship Vs. Divestment
HNW_NRG_B_Inset_Mask Climate change: Active Stewardship vs. Divestment At RBC Global Asset Management (RBC GAM)1, we believe that climate change is a material and systemic risk that has the potential to impact the global economy, markets and society as a whole. As an asset manager and fiduciary of our clients’ assets, we have an important responsibility to consider all material factors that may impact the performance of our investments. In 2020, we took steps to formalize the actions we are taking to address climate change with the launch of Our approach to climate change. A cornerstone of this approach is active stewardship as an effective mechanism to motivate companies to build strategies that enable climate mitigation* and adaptation**. Some investors who are concerned about the impact of in extreme cases, the filing of lawsuits. As global investors climate change and are seeking to align their investment continue to integrate climate change into their investment strategies with these views have chosen a divestment decisions, active managers use both engagement and proxy approach. While RBC GAM does offer divestment solutions, voting as a means of better understanding and influencing we believe that the best approach to support the transition the activities or behaviour of issuers. to a low-carbon economy is through active stewardship. Engagement Active stewardship Engagement involves meeting with the boards and Active stewardship refers to the suite of actions investors management of issuers, typically corporations, and learning can take to better understand and influence the activities or about how they are approaching strategic opportunities and behaviour of issuers. It can be thought of as a conversation material risks in their business. -
ASI Position Statement – Fossil Fuels April 2021
ASI Position Statement – Fossil Fuels April 2021 “ At ASI, consideration of climate-change risks and opportunities is an integral part of our investment process across all asset classes and sectors. We carefully consider fossil fuel related risks and the ability to transition to alternatives in our investment decisions.” 02 ASI Position Statement Fossil Fuels – Our Approach for Investments Financial risks related to fossil fuels are becoming more material the transition from more carbon-intensive fuels to gas where as pressure to decarbonise the global economy is growing. alternatives are limited. However, we also consider the risk of gas Aberdeen Standard Investments (ASI) fully acknowledges the role utilities and infrastructure becoming stranded in the medium to of fossil fuels in causing and further exacerbating climate change. long term. Transitioning directly to low-carbon energy sources We support the goals of the Paris Agreement, are members of the such as renewables is our preference and we strongly Net Zero Asset Manager initiative and believe that urgent action is encourage it. required to limit global warming to 1.5°C. This means aiming for a global net-zero emissions economy by 2050, in which fossil fuels Pounds of CO2 emitted per million Btu of energy will only play a minor role. On the path to that world, we need to transition to a low-carbon Natua as economy, in which fossil fuels are phased out and replaced with Gasoine cost effective and reliable alternatives. This needs to be a ‘just’ (witot ethano) transition where effects on communities, workers and energy Diese ue and security are carefully considered. -
Fossil Fuels Divestment
Fossil Fuels Divestment ww3.haverford.edu /fossilfuelsdivestment/ Dear Friends, Over the past year, many colleges and universities have investigated divestment of endowment from firms that have investments in fossil fuels as a way of applying financial leverage against the use of carbon- based energy while promoting alternative sources. Here at Haverford, the dialogue was initiated in the summer of 2012 by a number of thoughtful students who, consistent with a national campaign, specifically asked the College to freeze all endowment investments in 200 companies identified as having the greatest proven reserves of coal, oil, and natural gas and to unwind all existing investments in these companies over a five-year period. The matter was referred to our Board’s Committee on Investments and Social Responsibility (CISR), which includes Investment Committee representation, in order to explore what such a move could mean for Haverford. The students who initiated this conversation expressed profound concern about the effects of climate change arising from the burning of fossil fuels, and they have challenged the College to engage thoughtfully on how we as an institution and as a community can act within our sphere to mitigate this global threat. As an institution committed to values of ethical concern and social responsibility, the College commends these students for initiating this important conversation. The dialogue has been serious, positive, and informed by the understanding that we must balance needs with ambitions. The CISR’s deliberations on this matter included meetings with the concerned students as well as an open forum with the broader College community, and were supported by research conducted by the College’s investment office. -
Extracting Fossil Fuels from Your Portfoliosm
EXTRACTING FOSSIL FUELS FROM YOUR PORTFOLIOSM: An UPDATED Guide to Personal Divestment and Reinvestment ABOUT THE AUTHORS 350.org is a global network inspiring the world to rise to 100% of Green Century’s profits earned for managing the challenge of the climate crisis. Since its inception in the Green Century Funds belong to the founding group 2008, their online campaigns, grassroots organizing, and of environmental non-profit organizations, the Public mass public actions have been led from the bottom up Interest Research Groups (PIRGs), that started Green by people in 188 countries. Century in 1991. 350 means climate safety. To preserve our planet, Since 2005, Green Century’s Balanced Fund has been scientists tell us we must reduce the amount of CO2 in 100% fossil fuel free; it is an actively managed fund the atmosphere from its current levels of 400 parts per made up of the stocks and bonds of well-managed million to below 350 ppm. 350 is more than a number — companies. The Balanced Fund is almost 50% less it’s a symbol of where we need to head as a planet. carbon intensive than the S&P 500® Index as measured by the international data and analysis firm Trucost.1 The 350 works in a new way — everywhere at once using Green Century Equity Fund, which is also fossil fuel free, online tools to facilitate strategic offline action — under invests in the longest running sustainability index minus the belief that if a global grassroots movement holds the fossil fuel companies in that index. our leaders accountable to the realities of science and principles of justice, we can realize the solutions that For more information, click here or visit www. -
Climate Risk and the Fossil Fuel Industry: Two Feet High and Rising
View metadata, citation and similar papers at core.ac.uk brought to you by CORE provided by IssueLab Working Paper Climate Risk and the Fossil Fuel Industry: Two Feet High and Rising Jim Krane, Ph.D. Wallace S. Wilson Fellow in Energy Studies, Rice University’s Baker Institute for Public Policy © 2016 by the James A. Baker III Institute for Public Policy of Rice University This material may be quoted or reproduced without prior permission, provided appropriate credit is given to the author and the James A. Baker III Institute for Public Policy. Wherever feasible, papers are reviewed by outside experts before they are released. However, the research and views expressed in this paper are those of the individual researcher(s) and do not necessarily represent the views of the James A. Baker III Institute for Public Policy. This paper is a work in progress and has not been submitted for editorial review. Climate Risk and the Fossil Fuel Industry Keywords Climate change risk, fossil fuel, stranded assets, unburnable carbon, carbon bubble, carbon budget, divestment, carbon price, carbon tax, cap-and-trade, INDCs, COP 21, shareholder risk, leave it in the ground, greenhouse gas, GHG, decarbonization Introduction Burning coal, oil and natural gas is responsible for two-thirds of the world’s emissions of greenhouse gases. These same fuels also represent the economic mainstay of resource-rich countries and the world’s largest firms. Any steps humanity takes to reduce climate- warming emissions will damage commercial opportunities. Relief for the climate means danger for the fossil fuel business. Given the stakes, it bears asking: What, exactly, are the risks? How are they manifested and distributed? Luminaries such as the US president and the governor of the Bank of England have called for leaving large portions of oil, gas, and coal reserves in the ground.