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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. -
IPO Or Divestiture: Making Informed Decisions
IPO or divestiture: Making informed decisions By Yael Woodward Amaral, Partner, Accounting Advisory, KPMG in Canada To divest or go public. It is a simple proposition with complex considerations. No doubt, pursuing an initial public offering (IPO) is a viable option for private equity (PE) funds looking to raise cash from a portfolio asset they are not ready to part ways with, but like any major portfolio decision, it pays to go in with eyes wide open. Taking the IPO journey has its merits. Current market “ Going public is not a panacea for conditions are making it more difficult for funds to operate on a debt leverage model approach at the same levels of return. difficult times. As anyone who has As such, going public may be a mechanism to extract capital ventured down the IPO path can from the asset while maintaining ownership. attest, it only means trading one set of challenges for another.” The true cost of going public Even still, going public is not a panacea for difficult times. Economy of scale As anyone who has ventured down the IPO path can attest, It is one thing to say your organization wants to be public it only means trading one set of challenges for another. and another to be ready for the costs, compliance, and Whether raising a million dollars or a billion, going public public scrutiny that entails. The massive shift in the reporting means becoming beholden to new rules, processes, public environment alone can be a significant challenge for the shareholders and regulators. This can be unfamiliar territory under-prepared, as it demands significant financial reporting for funds that are used to working in a more autonomous capabilities, controls, IT infrastructure, human resource environment and selling acquisitions when the numbers deem considerations and governance that simply cannot be it best. -
Global Corporate Divestment Study
2014 | ey.com/transactions EY | Assurance | Tax | Transactions | Advisory About EY GlobalEY is a global leader in assurance, tax, transaction and advisory services. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our Corporateclients and for our communities. EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. For more information Divestmentabout our organization, please visit ey.com. Study About EY’s Transaction Advisory Services How you manage your capital agenda today will define Strategicyour competitive position tomorrow. divestments We work with clients to create social and economic value by helping them make better, more informed decisions about strategically managing capital and transactions in fast-changing drivemarkets. Whether value you’re preserving, optimizing, raising or investing capital, EY’s Transaction Advisory Services combine a unique set of skills, insight and experience to deliver focused advice. We help you drive competitive advantage and increased returns through improved decisions across all aspects of your capital agenda. © 2014 EYGM Limited. All Rights Reserved. EYG no. DE0493 ED 0115 This material has been prepared for general informational purposes only and is not intended to be relied upon as accounting, tax, or other professional advice. -
Ma Divestment 4-1-2021
BPB 2021-013 BEM 405 1 of 23 MA DIVESTMENT 4-1-2021 DEPARTMENT POLICY Medicaid (MA) ONLY Divestment results in a penalty period in MA, not ineligibility. Divestment policy does not apply to Qualified Disabled Working Individuals (QDWI); see Bridges Eligibility Manual (BEM) 169. Divestment is a type of transfer of a resource and not an amount of resources transferred. Divestment means the transfer of a resource (see resource defined in this item and in glossary) by a client or his spouse that are all the following: • Is within a specified time; see look back period in this item. • Is a transfer for less than fair market value; see definition in glossary. • Is not listed under transfers that are not divestment in this item. Note: See annuity not actuarially sound and joint owners and transfers in this item and BEM 401 about special transactions considered transfers for less than fair market value. During the penalty period, MA will not pay the client’s cost for: • Long Term Care (LTC) services. • Home and community-based waiver services. • Home help. • Home health. MA will pay for other MA-covered services. Do not apply a divestment penalty period when it creates an undue hardship; see undue hardship in this item. RESOURCE DEFINED Resource means all the client’s and spouse's assets and income. It includes all assets and all income, even countable and/or excluded assets, the individual or spouse receive. It also includes all assets and income that the individual (or spouse) were BRIDGES ELIGIBILITY MANUAL STATE OF MICHIGAN DEPARTMENT OF HEALTH & HUMAN SERVICES BPB 2021-013 BEM 405 2 of 23 MA DIVESTMENT 4-1-2021 entitled to but did not receive because of action by one of the following: • The client or spouse. -
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. -
Over 100 Global Financial Institutions Are Exiting Coal, with More to Come Every Two Weeks a Bank, Insurer Or Lender Announces New Restrictions on Coal
Tim Buckley 1 Director of Energy Finance Studies, Australasia 27 February 2019 Over 100 Global Financial Institutions Are Exiting Coal, With More to Come Every Two Weeks a Bank, Insurer or Lender Announces New Restrictions on Coal Executive Summary Today, over 100 globally significant financial institutions have divested from thermal coal, including 40% of the top 40 global banks and 20 globally significant insurers. Momentum is building. Since January 2018, a bank or insurer announced their divestment from coal mining and/or coal-fired power plants Global capital is fleeing every month, and a financial institution the coal sector. who had previously announced a divestment/exclusion policy tightened This is no passing fad. up their policy to remove loopholes, every two weeks. In total, 34 coal divestment/restriction policy announcements have been made by globally significant financial institutions since the start of 2018. In the first nine weeks of 2019, there have been five new announcements of banks and insurers divesting from coal. Global capital is fleeing the thermal coal sector. This is no passing fad. Since 2013 more than 100 global financial institutions have made increasingly tight divestment/exclusion policies around thermal coal. When the World Bank Group moved to exit coal in 2013, the ball started rolling. Following, Axa and Allianz become the first global insurers to restrict coal insurance and investment respectively in 2015, and their policies have subsequently been materially enhanced. Next, some 35 export credit agencies (ECA) released a joint statement agreeing to new rules restricting coal power lending. In the same year, the China-led Asian Infrastructure Investment Bank trumpeted its global green credentials with the Chairman confirming the Bank was in practice ruling out finance for coal-fired power plants. -
Divest from the Carbon Bubble? Reviewing the Implications and Limitations of Fossil Fuel Divestment for Institutional Investors1
Review of Economics & Finance Submitted on 24/12/2014 Article ID: 1923-7529-2015-02-59-22 Justin Ritchie, and Hadi Dowlatabadi Divest from the Carbon Bubble? Reviewing the Implications and Limitations of Fossil Fuel Divestment for Institutional Investors1 Justin Ritchie (Correspondence author) Institute for Resources, Environment and Sustainability, University of British Columbia 2202 Main Mall, Vancouver, BC V6T 1Z4, Canada Tel: +1-919-701-9872 E-mail: [email protected] Hadi Dowlatabadi Institute for Resources, Environment and Sustainability, University of British Columbia 2202 Main Mall, Vancouver, BC V6T 1Z4, Canada Tel: +1-778-863-0103 E-mail: [email protected] Homepage: http://blogs.ubc.ca/dowlatabadi/welcome/ Abstract: Climate change policies that rapidly curtail fossil fuel consumption will lead to structural adjustments in the business operations of the energy industry. Due to an uncertain global climate and energy policy framework, it is difficult to determine the magnitude of fossil energy reserves that could remain unused. This ambiguity has the potential to create losses for investors holding securities associated with any aspects of the fossil fuel industry. Carbon bubble risk is understood as financial exposure to fossil fuel companies that would experience impairments from assets stranded by policy, economics or innovation. A grassroots divestment campaign is pressuring institutions sell their fossil fuel company holdings. By September 2014, investors had responded by pledging to divest US $50 billion of portfolios. Though divestment campaigns are primarily focused on a moral and political rationale, they also regularly frame divesting as a strategy for mitigating stranded asset risk. We review aspects of the divestment movement alongside the context of carbon bubble risk. -
The Carbon Bubble: the Financial Risk of Fossil Fuels and Need for Divestment
EUROPEANGREENPARTY THE CARBON BUBBLE: The financial risk of fossil fuels and need for divestment 2 The 2° target: a minimum consensus which The Carbon Bubble represents economic dynamite 3 The world is agreed: the temperature of the atmosphere must not rise by more than 2°C. However, this means that most oil, gas and coal reserves are valueless. for divestment fossil fuels and need The financial risk of The international community has have on a number of occasions stressed committed itself to an unequivocal target: the urgency of consistent measures if we the Earth’s atmosphere must not warm are to keep the Earth on track towards by more than 2°C by the end of the cen- the 2°C target. tury. At the 2010 UN Climate Conference in Cancún, Mexico, representatives of The 2°C target will not be easy to achieve 194 states committed themselves to this and will only be feasible by determined target. Even the USA and China, who action from the global community. At the never signed the Kyoto Protocol, sup- same time however, climate researchers ported the decision, as do all other major say that 2°C constitutes the borderline greenhouse gas emitters. not between ‘tolerable’ and ‘dangerous’ climate change, but rather between The 2°C target refers to the rise in tem- ‘dangerous’ and ‘very dangerous’ cli- perature relative to pre-industrial levels. mate change. Even with an increase However, as the mean temperature has of ‘only’ 2°C, Arctic ice sheets will melt, already risen by 0.8°C since the 19th and habitats and cultural regions will be Century, the climate must not warm by destroyed. -
Divestment Frequently Asked Questions
Divestment Frequently Asked Questions What is Divestment? When you invest your money, you might buy stocks, bonds, or other investments that generate income for you. Universities (and colleges in the US), as well as religious organizations, pension funds, and other institutions put billions in these same kinds of investments to generate income to help run their institutions. Divestment is the opposite of an investment — it simply means getting rid of stocks, bonds, or investment funds that are unethical or morally ambiguous. Fossil Fuel investments are a risk for investors and the planet – that’s why we’re calling on institutions to divest from these companies. There have been a handful of successful divestment campaigns in recent history, including Darfur, Tobacco, and others, but the largest and most impactful one came to a head around the issue of South African Apartheid. By the mid1980s, 155 campuses — including some of the most famous in the country — had divested from companies doing business in South Africa. 26 state governments, 22 counties, and 90 cities, including some of the nation’s biggest, took their money from multinationals that did business in the country. The South African divestment campaign helped break the back of the Apartheid government and usher in an era of democracy and equality. What are we asking for, and who are we asking? We want institutional leaders to immediately freeze any new investment in fossil fuel companies, and divest from direct ownership and any commingled funds that include fossil fuel public equities and corporate bonds within 5 years. 200 publiclytraded companies hold the vast majority of listed coal, oil, and gas reserves. -
IPO As a VC-Funds Type of Exit
Volume X Issue 29 (September 2017) JMFS p p .99-129 Journal of Management Warsaw School of Economics and Financial Sciences Collegium of Management and Finance Dorota Podedworna-Tarnowska Collegium of Business Administration Warsaw School of Economics IPO as a VC-Funds Type of Exit A b s t r a c t The key characteristic of private equity finance is that investors hold their investments only for a limited period of time. The key goal of VC funds is to grow the company to a point where it can be sold at a price that far exceeds the amount of capital invested. This process is called an exit or divestment. There are three basic types of exits: going public, being acquired by a larger corporation, a sale to a third-party investor. It is a widely believed and accepted proposition in private equity literature that the initial public offering of a private equity portfolio company is the most successful and profitable exit opportunity. However, according to the few sources of literature, public offerings are not the preferred divestment type for venture capital firms. Going public is one of the most critical decisions in the lifecycle of a firm. This is not easy, as the process is very comprehensive and complex. Hence, a lot of considerations should be taken into account. Because every investee firm is different, a development plan to achieve a successful exit takes into consideration a number of macroeconomic and microeconomic factors. Moreover, several advantages and disadvantages of exit through an IPO could be indicated. The objective of this paper is to show the success and profitability of going public by VC funds. -
Divestitures: Applying a Five-Step Process
Divestitures APPLYING A FIVE-STEP PROCESS William J. Gole What is the issue? Corporate divestitures are common but complex transactions that are often poorly planned and executed. Why is it important? Without proper planning and adequate resources, the divesting company is likely to impair the value of the transaction and, ultimately, reduce the value of the company. What can be done? A properly structured approach enables organizations to efficiently and effectively manage corporate divestiture transactions while optimizing their value. MANAGEMENT ACCOUNTING GUIDELINE GUIDELINE CONTENTS Applying a Five-Step Process 2 What is RAISE and How does it Apply to Divestitures? 2 An Overview of Corporate Divestitures 3 Step 1: Strategic Assessment 4 Step 2: Divestiture Planning 6 Step 3: Divestiture Preparation 8 Step 4: Divestiture Execution 12 Step 5: Retrospective Analysis 15 In Summary 16 Additional Sources of Information 16 2 Applying a Five-Step Process Corporate divestitures are merger and acquisition (M&A) transactions that involve the sale of part of a business, such as a subsidiary, business unit, division, or product line. Divestitures have characteristics that differentiate them from other M&A transactions, such as the need to separate or “disentangle” a business being sold from the parent organization. Managers who have only participated in acquisition transactions may see divestitures as a mirror image of acquisi- tions and fail to understand the fundamental difference between the sellers’ and buyers’ perspectives. After the decision to sell has been made, the seller will focus on planning the transaction and preparing the information for the transaction. The acquirer will focus on reviewing, analyzing, and validating the information provided by the seller. -
Downsizing, Decommissioning, and Divestment
151 DOWNSIZING, DECOMMISSIONING, AND DIVESTMENT DOWNSIZING, © T. Pollett Downsizing, Decommissioning, and Divestment GOOD PRACTICE POINTERS • Revisit stakeholder analysis in light of proposals for downsizing, decommissioning or divestment. • Communicate with stakeholders early to allay fears and uncertainty. • Provide regular updates and progress reports to stakeholders. • Plan and execute stakeholder consultation as though it were at the project feasibility stage. • Consult on transfer and management of assets and liabilities. • Gear up to manage grievances. • Review the capacity of future management systems to deliver stakeholder engagement on decommissioned or divested assets. Project Feasibility studies Construction Operations Downsizing, concept and project planning decommissioning, and divestment The range of stakeholders potentially affected by (or influential in) decisions taken to downsize operations, decommission facilities, or divest assets, and the ways in which they will be affected, will likely be different from those at earlier stages of a project. Impacts such as the loss of local employment, a general decline in regional economic activity (particularly for larger projects or projects in rural locations), 152 the cutting-back of community services previously provided by the company, and the disbandment of local community involvement in PART TWO PART monitoring environmental and social impacts, can all introduce long- term financial and reputational liabilities for the project company. Engaging with stakeholders well before these events take place can lower costs, reduce liabilities and strengthen the overall reputation of the company. For example, engagement can help guide work to rehabilitate any of the natural environment that has been damaged by the project, integrate operational infrastructure into existing public services, develop worker retrenchment programs, and establish funds and management structures for the long-term monitoring of assets.