Divestment Convergence Nov. 8 2014

Divestment & ReinvestmentNov 8, 2014

@timenash

Key Messages

• Anyone Can Do It

• Speak Their Language

@timenash

• No Need to Sacrifice Returns

• Risk Mitigation

Basic Portfolio

Stocks,(60%(

Bonds,(40%(

(assuming 40 years old)

@timenash

Couch Potato Portfolio

http://canadiancouchpotato.com/model-portfolios/

@timenash

Organic Couch Potato Portfolio

Canadian&Equity,&15%&

US&Equity,&15%&

Green&Equity,&15%&

Global&Equity,&15%&

Canadian&Bonds,&30%&

Impact&Bonds,&10%&

Organic(Couch(Potato(Por/olio(

@timenash

Canadian Economy

Epiphany

Fossil Fuel Free PortfolioReal%Estate%2.5%%

Healthcare%5%%

Industrials%5.5%%

Water%5%%

Consumer%Discre;onary%5%%

Consumer%Staples%4.5%%

Technology%7.5%%

Cleantech%4%%

Green%Energy%4%%

Environmental%Services%4.5%%

Financials%10%%Telecommunica;ons%

2.5%%

Canadian%Gov't%Bonds%30%%

Community%Bonds%10%%

Fossil&Fuel&Free&Por+olio&

• Every sector except Energy, Materials, Utilities, Infrastructure

• Includes Green Energy, Water Infrastructure, Cleantech, and Environmental Services

• Also includes Community Bonds offered by solar co-operatives in Ontario (Impact Investments)

Fossil Fuel Free Portfolio

@timenash

Investment Committees

• Different from the Board of Directors

• Financial Decision Makers

• Fiduciary Duty to Maximize Returns

• Status Quo Bias & Risk Aversion

@timenash

Investment Committees

• Usually older men with finance background

• Often volunteer on other boards

• Identify champions, opposers, & swing votes

• Need to connect with them as humans

Objections Handling• Returns Will be Lower

• Loss of Diversification

• What else?

@timenash

Performance• Coal Mining / Oil Sands have been

severely under-performing

S&P 500 (VOO)

Oil Sands (CLO)Coal Mines (KOL)

PerformanceOil Sands vs. Green Energy

Green Energy (QCLN)

Oil Sands (CLO)

***Doesn’t include dividend income***

Risk-Adjusted Returns• Measures of Beta (volatility) ignore systemic risks

• Unburnable carbon is a HUGE systemic risk

• Canadian economy (banks, etc.) is highly exposed

• Committee is putting the endowment at risk

@timenash

Diversification

• Modern Portfolio Theory

• Excluding any sector will increase volatility

• Can be offset by investing in alternative energy

@timenash

Diversification

• Most boards have zero exposure to emerging green sectors and impact investments. Turn this argument on its head by asking them to better diversify by investing in these sectors!

@timenash

Re-investment

• PowerShares Cleantech Portfolio (PZD)

• iShares Global Water Index ETF (CWW)

• Market Vectors Environmental Services Fund (EVX)

• NASDAQ CleanEdge Green Energy Fund (QCLN)

@timenash

YieldCosLower risk options for investors looking for

income instead of growth

Green Bonds

Compromise• If the board is not ready to divest they

should start by underweight & hedge

• Lower exposure to carbon risk, and hedge by investing in green companies

• This is a win because a large endowment doing this has the same impact as a small endowment divesting

Keep it up!!

[email protected]