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how to talk the financial arguments

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by

Brett Fleishman

on 16 August 2014

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Transcript of how to talk the financial arguments

financial arguments
Fossil Fuel Divestment:
Next Level Discourse
Basic Elements
Looking at
Risk and Return

Risk and Return
The top 200
The energy sector performance
The key players
Engagement
Capital Expenditure (Capex)
What about extra fees/ costs?
Asset Owner
Asset Manager
Fossil fuel reserves listed on the world’s stock markets
top 100 listed coal companies and
top 100 listed oil and gas companies
by size of reserves
converted to CO2 potential
The energy sector is an average of 10% of market capitalization
10 cents of every dollar
invested in stocks is funding climate change
market value of the S&P 500 index
It's a relatively small ask
S&P 500 has 26 companies
MSCI EAFE has 35 companies
5.71%
Fossil Fuels
9.87%
S&P 500
19.17%
11.79%
Source: 2012 Fortune 500 list
=
Size of company by profit
Go Fossil Free
Asset Owners
(SF Employees)
Supply Money
to a FUND
(SF Employee
Retirement Fund)
Trustee(s) control
the fund/has vote.
Hires Consultant(s)
Asset Managers
(Pick the stocks)
Consultants
(Pick the Managers)
This is you:
These are your potential allies:
Go Fossil Free
Fossil Fuel Stock Performance
Exploration and development over the last 12 months by these 200 companies totaled US$674billion
$7Billion
$9Billion
$8 billion
4th quarter production
-2%
-3%
-5%
“Beyond Petroleum”: Sold off its entire wind and solar energy investments (2011)
In 2007 hit a high of 2.5% in alternative energy investments, today it's down to 1.5%
From 2.5% of overall expenditures in 2008, alternative energy dropped to1.5% in 2012
Has no investments in "alternatives"

April 2012 it divested all alternative energy activities to focus exclusively on its "core business," exploring and producing oil and natural gas

"[T]he pursuit of alternative fuels must not detract from the development of oil and gas." - VP J.S. Simon (testimony to congress 2008)

75% of the 200 list has no evidence of clean-tech revenues

No major oil company has ever spent enough on alternatives for it to amount to even 10% of its revenues or assets (the SEC's threshold for public reporting requirements on financial expenditures)
SEC Rule 14a-8: you need to have $2,000 worth of a company for one year before you can file a shareholder proposal.
We are on a tight timeline. The urgency of the issue doesn't lend itself to time-consuming resolutions
When it comes to producing less product, shareholder engagement is not a realistic option
If engagement is important to your institution, you can minimize your risk and hold the minimum required to keep your seat
"Investors have repeatedly engaged fossil fuel companies on climate change, but the results have fallen short given the threat it poses to the entire global economy,"
-New York State Comptroller Thomas P. DiNapoli
Returns
Standard Deviation
Sharpe Ratio
Institutions typically don't use funds

Low costs options exist

Fees in context of what is being done now

As RFPs go out lower fees can be expected
Questions?
Full transcript