The Environmental and Energy Study Institute (EESI), a not-for-profit organization dedicated to promoting environmentally sustainable societies, will complete moving its stock holdings to socially responsible funds by December 2016. Half of EESI's holdings are already in such funds.
"Aligning our investments with our mission is essential to walk our talk," said EESI board member Claudine Schneider, a former Republican Member of Congress (RI, 1980-1990) who spearheaded EESI’s move to socially responsible investing. "Making investment decisions on the basis of environmental, social, and governance criteria helps EESI continue its work advancing clean energy and addressing climate change."
EESI's commitment extends beyond mere avoidance of companies whose policies conflict with our mission statement: it emphasizes a positive search for companies that are in line with our organizational values and vision. In particular, EESI will preferentially invest in companies that have demonstrated a commitment to environmental stewardship, energy efficiency, and clean renewable energy; EESI will also divest from companies that extract energy from fossil fuels.
The decision to divest from fossil fuels was driven by both mission-related and financial considerations. Because of EESI’s longtime work on climate change, it understands that holding fossil fuel stocks carries significant risk, as many fossil fuels assets will likely remain in the ground, becoming stranded and worthless.
EESI's Board of Directors made the unanimous decision to invest 100 percent of EESI's stock holdings in a socially responsible manner at its May meeting. The Board had previously decided to move a portion of EESI's stock holdings to socially responsible investing (SRI) in August 2013. This phased approach allowed EESI to explore its options and make sure socially responsible investments provided acceptable rates of return. In fact, EESI's initial SRI fund has outperformed its benchmark, the MSCI EAFE, by 2.6 percent on an annualized basis.
"The Board is concerned with our fiduciary responsibilities: EESI's investments contribute to our operating budget, enabling us to fulfill our mission," explained EESI Board Chair Jared Blum. "Confirming our initial research, we found that investing in socially responsible funds was a sound investment. We are also thrilled to be investing in renewable energy and energy efficiency; moving to an economy based on clean energy is an important part of our mission."
Several studies have confirmed that socially responsible investing does not mean foregoing returns and may in fact reduce investment risk. Divesting from fossil fuel companies, for instance, helps EESI avoid oil and gas sector volatility. It also helps avoid climate risk, which is the risk that companies face from climate change and policies to address climate change. Oil and coal companies are especially vulnerable: the upcoming implementation of the Paris Climate agreement means the international community is expected to clamp down on harmful carbon emissions; nations throughout the world are expected to promote energy efficiency and clean energy sources, making these a better investment.
EESI’s move has helped spur the ever-burgeoning market for socially responsible funds. "In 2013, we expressed our commitment to socially responsible and fossil fuel-free investing to one of our long-time fund managers. In response, the firm established an environmental fund that not only meets our goals—an investment product that is socially responsible and fossil fuel-free—but that is also open to other institutional investors," said EESI Executive Director Carol Werner. "It's exciting that we were able to drive change to help grow the market of investment options for sustainable, socially responsible, and fossil fuel free investing."
Werner noted that "EESI has offered SRI funds for the staff retirement plan for many years, and in July 2013, we began to provide employees with the option to invest in fossil-free funds. For so many of us, workplace retirement plans are the primary way we invest, so it was important for us to offer sustainable investment options to our staff, since we all are working for sustainability at EESI."
Socially Responsible Investing has become a large market, accounting for more than one out of every six dollars under professional management in the United States, according to the Forum for Sustainable and Responsible Investment. Not all SRI funds are fossil-free, however. Several organizations can help investors identify fossil-free, socially responsible funds, including Fossil Free Funds and the US SIF - the Forum for Sustainable and Responsible Investment.
EESI developed a Policy for Socially Responsible Investment to guide its investments when it began shifting them in 2013. In addition to traditional financial analysis, EESI considers environmental criteria, employment and workplace practices, workforce diversity, community relations, human rights, and corporate governance. One of EESI's goals is to invest in companies that have demonstrated a commitment to sustainability by either minimizing their environmental and carbon footprint or by producing products and services that have a direct environmental benefit (such as renewable energy). EESI’s policy excludes companies that extract or generate energy from fossil fuels. EESI also emphasizes investments in companies with exceptional workplace safety records; innovative programs promoting diversity in the workplace; positive relations with their communities; strong policies protecting human rights; and transparent corporate governance structures—among many other criteria.
EESI is proud to further its mission through its investments, as part of a broader trend toward socially responsible and sustainable investing.