Fossil-free investment fund set to launch

Getting your money out of oil, gas and coal is getting easier, not just for institutional investors but for individuals.

Before the end of this year Vancouver-based Genus Capital Management, a leading fund manager for ESG (environment, social and governance) investors, will launch the Genus Fossil Free Hybrid Platform. Using a combination of human and robo-advisors, the new service will allow investors with as little as $100,000 to build their own investment portfolio entirely divested from energy companies, said Genus Capital director of sustainable investment Mike Theissen.

It’s good news for Catholic investors who want to align their retirement plans and investment portfolios with Church teaching. In June the Vatican issued guidelines for Catholic investors that frame investing in fossil fuels as an ethical choice. In addition to avoiding investments that fuel abortion and the arms trade, the Vatican guidelines ask Catholic investors to care for the environment and pull out of fossil fuels.

According to the Global Catholic Climate Movement, at least 190 Catholic institutions — dioceses, religious orders, health-care networks and universities — have divested from fossil fuels. In Canada they include the Jesuits, the Loretto Sisters and the Sisters of St. Joseph. They’re all part of a broader movement tracked by climate activists at 350.org. The divestment movement has seen over $11 trillion in institutional investment funds worldwide go fossil free.

When Pope Francis first called on the private sector to “progressively and without delay” divest from fossil fuels in his landmark 2015 encyclical Laudato Si’, many small investors, especially in Canada where markets are dominated by resource industries, thought the Pope’s instructions expressed a laudable ideal but were impractical. However, today a middle-class investor can walk into the local Royal Bank and buy into the RBC Vision Fossil Fuel Free Global Equity Fund. BMO offers the Sustainable Opportunities Global Equities mutual fund.

Genus, whose wealth management services usually require a $250,000 minimum investment, knows there’s a big market of smaller investors who want to align their investments with their values. Theissen argues that those small investors can nudge the global economy in a better direction.

“As more people divest, it means that there is going to be less demand for that investment. If there is less demand, then the cost of capital goes up. If the cost of capital goes up, that means there are going to be less projects around oil and gas,” Theissen said.

Small investors driving up the cost of capital for big oil companies is only one half of the equation. Divesting isn’t just a negative choice not to invest in oil, gas and coal. It also entails a positive choice to redirect those funds into a future, carbon-free economy, Theissen said.

“Yes, you are taking your money out of a certain area. But you are also putting it in somewhere else,” he said. “You’re putting it into another industry that is aligned with your values.”

Theissen calls this “impact investing.” It entails backing companies developing and selling new, cleaner technologies, alternate energy sources and solutions to climate change.

“For our impact investing funds up to the end of August, there’s a return of about 16 per cent,” he said. “When we’re in a time of crisis, what the world needs, what the economy needs, is these solutions. So you’re rewarded in these times.”

ESG-focused investment funds now manage well over $1 trillion for individual investors, more than double the funds they handled in 2016, according to the industry tracker Morningstar Research Inc.

Looking at the wildfires in California, Australia and Siberia over recent years, as well as the extreme hurricane seasons the Caribbean, Florida and the Philippines have endured, it’s not alarmist to call our climate situation a crisis, according to Theissen. The global pandemic over the last nine months has demonstrated the economy can adapt during a crisis.

“We’ve all been forced to really change our lives in the past few months and really adapt. Our economy has adapted. Organizations of all sorts have had to change. I think that’s a big plus,” he said. “We know that we can change for a potential crisis in the future. We’re probably a lot more resilient now, overall as an economy and as a society, than we were before.”

The trick for investors in a crisis is to back the economy of the future, Theissen said.

“You could have companies that are actually benefiting from a lot of these changes, like renewable energy companies or clean technology. They’re going to do extremely well when there is this big transition,” he said. “If part of your portfolio is getting hurt by the transition, you want to have another part of your portfolio that is actually benefiting from the transition to offset that.”