According to the DivestInvest network, 985 institutional investors announced in 2018 they would be pulling their money out of fossil fuels. Together, they are worth 6,24 billion dollars. Perhaps not a major tectonic shift for the financial markets. But with its 'learning network', The Shift has already turned words into deeds, albeit at a small scale.
So far, there are seven of them: financial managers of academic institutions, insurance companies and pension funds, meeting four times a year to learn from each other about 'divestment'. Bart Corijn of The Shift, who manages the learning network, prefers the term 'climate-friendly investment'. "We've seen how 'divestment' carries a negative connotation for many people. In the financial world, the term is often associated with ideology and activism." The word is also often interpreted very narrowly, relegating its social aspects and demand for good governance to the background.
The negative terminology is just one of the reasons why the transition is happening only slowly. "CFOs and managers worry about the risk of a lower yield. But that fear is based on a myth. Several studies have proven average yields don't differ between portfolios with and without fossil fuels." A genuine bottleneck, however, is today's supply. "Funds prefer to invest large sums. At the moment, there are simply too few large-scale green projects out there for them to invest in." In the meantime, institutional investors are looking into the available sustainability data, working on interpreting it.
The Shift specifically approached the financial managers in its network when presenting the project. That was a deliberate choice. "It was important to us to make sure they, rather than the CSR managers, took part. The financial managers are the ones taking the financial decisions, the ones in direct contact with the board or directors." To convince them to join, The Shift organised meetings with each of the financial managers.
"We explained why investing in climate-friendly solutions is such a wise choice. Europe is already working on a regulatory framework for sustainable financing, for example. And fossil fuels are a textbook example of so-called 'stranded assets': investments that may be profitable today, but that will lose you money ten years from now.
To further strengthen our argument, we commissioned a study. Forum Ethibel, a non-profit expert organisation in the field of sustainable investment, compiled the latest scientific reports into a document that organisations can use as a guideline to decarbonise their investment portfolio."
But knowledge is just one part of the story. The learning network also offers a safe space, in which participants can exchange ideas on how a combination of positive and negative investments (investing more in certain assets, not investing at all in others) can create a climate-friendly framework.
Jeroen Vanden Berghe, Chief Logistics Adminstrator at Ghent University, adds: "We have a very clear goal at Ghent University: offering solutions to today's major ecological, social and economic challenges. More than ever, that ambition shines through in our education and research, but also in the choices we make while running our university. A sustainable investment strategy has been an inseparable part of that for several years now. What The Shift's learning network 'Klimaatvriendelijk Investeren' gave us, was an opportunity to share experiences with others with the same ambition, to let ourselves be inspired by them. The group has been a strong wind under our wings; we hope we in turn have helped others take flight."
Sounding board for peers
But is a learning network the right way to discuss financial affairs? Wouldn't an individual advisor be more suitable? "We are not financial advisors. Our goal is to offer participants the chance to exchange ideas with their peers. To allow them to learn from each other which arguments have worked best (or failed) to convince the board of directors."
The entire learning network is both non-commercial and entirely judgement-free. "We don't tell participants what to invest their money in. That's completely up to them." Corijn emphasises that the learning network specifically pushed for implementation. "The participating financial managers write down concrete actions they want to propose to their board of directors." By sharing insights and exchanging knowledge among peers, concrete steps are taken to make challenging but viable climate-friendly investments a reality.
Paul Jolie, manager of the Finance Department at KU Leuven: "The learning network was a source of inspiration and motivation to us. It resulted in concrete / balanced / thought-through actions. Exactly how we like to do things…"