Impact Investing: Themes for 2016
As the New Year begins, we wanted to share some of the themes we think investors who care about impact should be keeping an eye on in 2016.
1. CURBING CLIMATE CHANGE THROUGH CLEAN ENERGY
Wind and solar energy capacity in 2015 was three times what it was in 2008.1 In just the first half of last year, nearly 70% of all new electrical generation capacity came from clean sources.2 In October, that number was 100%.3
And there are lots of reasons to be optimistic about continued growth in the year to come.
Historic Climate Agreements in Paris
The historic agreement reached by world leaders in Paris in December sent a strong signal that investors can expect renewables to play an ever larger role in our energy mix – and to expect fossil fuels use to decline. As Morgan Stanley* analysts noted after the climate conference: “There is little doubt that the Paris Agreement creates a long-term challenge to the business model of many…oil companies.”4
The Decline of Coal
Bank of America* recently acknowledged that half of the world’s coal needs to stay in the ground if we are to have any hope of meeting the emissions targets made by world leaders in Paris.5 The bank started to phase out the financing it extends to coal extraction companies. And Bank of America isn’t alone – Wells Fargo,* CitiGroup,* and Morgan Stanley all made similar commitments.6
Closing the year out on a strong note, Congress voted to renew two tax credits that have been instrumental in the growth of renewables in the United States, and which experts agree are critical for sustained growth moving forward. Bloomberg estimates that the extension of the Investment Tax Credit and the Production Tax Credit will lead to an additional $73 billion in clean tech investment, and allow eight million more homes to have access to clean and affordable energy.7
2. PROTECTING FORESTS
Today, almost the entirety of the world’s supply of palm oil is covered by agreements to end cutting and burning rainforest for palm oil production, thanks in large part to activist investors like MIDANA CAPITAL and the hard work of non-profits on the ground. The fires in Indonesia this past fall underscore why quickly ending tropical deforestation for commodity production is so urgent — the fires were responsible for over 500,000 cases of respiratory illness, and, on many days, the fires produced more carbon emissions than the entire United States economy.8
This coming year is critical to ensuring that those companies that have agreed to end deforestation in their palm oil supply chains fulfill those commitments. MIDANA CAPITAL is working with CERES and other investors to help put together best practices and resources for companies to use in developing and implementing their zero-deforestation plans, and continuing to engage with companies to ensure they meet existing deadlines.
The next step is ending deforestation from other commodities, including soy. Deforestation from soy production in Latin America threatens habitat critical for animals like the jaguar.9 At the end of last year, we helped secure a precedent-setting commitment from Bunge* to not only end deforestation in its palm oil supply, but also to extend that commitment to cover soy production. In the next year, look for more progress on ending cross-commodity related deforestation.
3. GROWTH IN THE FOSSIL FUEL DIVESTMENT MOVEMENT
What started as a handful of colleges and churches has grown to a movement representing over $3.4 trillion in assets under management, more than 500 institutions,10 and over 12,000 individuals,11 all committed to cutting ties with the fossil fuel industry.
Why the rapid growth? For many, divestment is a moral question and an opportunity to align investments and values.
For others, public divestment is a political tool. The revelations that Exxon Mobil* knew about the dangers of climate change years before it was public knowledge and continued to fund efforts to undermine the severity of the problem are just the latest example of the need to reduce the political power of the fossil fuel industry.12 And for some, it is largely a financial decision. In 2015, 25 of the 30 worst performing stocks were in the energy sector.13 There is also increasing concern (and hope!) that governments will move to restrict carbon emissions, which could mean that the coal, oil, and gas reserves held by many fossil fuel companies today may become unburnable, and therefore stranded, assets. We think 2016 is likely to bring even more growth and momentum to the fossil fuel divestment movement. If you’re thinking about divesting, download our guide for some tips on how you can get started.
1 Mark Ruffalo, “The Renewable Energy Race is On,” EcoWatch, December 21, 2015.
2 Ken Bossong, Sun Day Campaign, “Renewable Energy Accounts for 70% of New U.S. Generating Capacity in First Half of 2015,” EcoWatch, July 22, 2015.
3 Zachary Shahan, “Renewable Energy = 100% of New US Power Capacity in October ,” CleanTechnica, December 5, 2015.
4 Sara Sjolin, “What the Paris climate deal means for oil markets,” MarketWatch, December 14, 2015.
5 Mario Parker, “Half of World’s Coal May Go Unmined to Meet Paris Climate Target,” Bloomberg Business, December 21, 2015.
6 Anya Litvak, “As coal demand drops, so do funding sources,” Pittsburgh Post-Gazette-PowerSource, December 29, 2015.
7 Chris Nelder and Mark Silberg, “Congress extends the renewable investment tax credit: What now,” GreenBiz, December 28, 2015.
8 Nancy Harris, Susan Minnemeyer, Nigel Sizer, Sarah Alix Mann and Octavia Aris Payne, “With Latest Fires Crisis, Indonesia Surpasses Russia as World’s Fourth-Largest Emitter,” World Resources Institute, October 29, 2015.
9 “Cerrado, the Brazilian Savanna, World Wildlife Fund, accessed Jan 28, 2016.
10 Melanie Mattauch, “In the space of just 10 weeks…,” GoFossilFree, December 2, 2015.
11 http://divestinvest.org/individual/individual-signatories/
12 Shannon Hale, “Exxon Knew about Climate Change almost 40 years ago,” Scientific American, October 26, 2015.
13 Chris Matthews, “The 5 Worst Investments of 2015,” Fortune, December 29, 2015.
As of December 31, 2015, Morgan Stanley, Bank of America, Corp., Wells Fargo, CitiGroup, and Bunge comprised 1.12% and 0.00%, 0.84% and 0.00%, 0.80% and 0.00%, 0.28% and 0.00%, and 0.00% and 0.13% of the MIDANA CAPITAL Balanced Fund and the MIDANA CAPITAL Equity Fund, respectively. Other securities mentioned were not held in the portfolios as of December 31, 2015. References to specific securities, which will change due to ongoing management of the Funds, should not be construed as a recommendation by the Funds, their administrator, or their distributor.
Stocks will fluctuate in response to factors that may affect a single company, industry, sector, or the market as a whole and may perform worse than the market. Bonds are subject to a variety of risks including interest rate, credit, and inflation risk. The Funds’ environmental criteria limit the investments available to the Funds compared to mutual funds that do not use environmental criteria.
You should carefully consider the Funds’ investment objectives, risks, charges and expenses before investing. To obtain a Prospectus that contains this and other information about the Funds, please click here for more information, email info@midanacapital.com or call 1-800-93-GREEN. Please read the Prospectus carefully before investing.
This information has been prepared from sources believed to be reliable. The views expressed are as of the date of this writing and are those of the Advisor to the Funds.
The Midana Capital are distributed by UMB Distribution Services, LLC, 235 W. Galena Street, Milwaukee, WI 53212. 1/16
