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The Climate Change Dilemma for Investors

08/06/2013 02:23 EDT | Updated 10/04/2013 05:12 EDT

In this sequel to my previous article, I shed light on some of the recent divestment decisions by European banks, sending a stern message to the fossil fuel sector. I've also featured researchers who are turning to nature's wisdom to design sustainable technologies. And I'm particularly inspired by one man's relentless efforts to connect children and nature, which has resulted in a United Nations declaration. So get ready for the smorgasbord.

An asset management company is advising investors to replace fossil fuel stocks with clean energy stocks for a "small positive return effect". A recent report from IMPAX Asset Management entitled, "Beyond Fossil Fuels: The Investment Case for Fossil Fuel Divestment" which tracked the international equity markets over the past seven years says, eliminating the fuel sector from the MSCI World Index (a common benchmark for global stock funds) would have actually made a small return on investment.

"For the five years to the end of April 2013, which excludes the dramatic run up in energy prices ahead of the 2008 financial crash, excluding the fossil energy sector would have improved returns by almost 0.5 per centage points annually, to 2.3 per cent a year from 1.8 per cent."

The report coincides with a decision by Norwegian pension fund and insurer Storebrand to pull its investments from 13 coal producers and tar sands investment. The move is intended to "reduce fossil fuel and carbon dioxide exposure and ensure stable long-term returns," said Christine Tørklep Meisingset, head of sustainable investment at Storebrand.

Furthermore, a Dutch bank Rabobank - the country's largest -- is taking a bold stance against natural gas fracking. Not only has it refused to lend money to companies involved in natural gas fracking, but has also rejected loans to farmers who rent their land to those companies. The bank says the risks -- both financial and environmental - are just too great and consequently will not invest in energy that pollutes the atmosphere.

These reactions come on the heels of a new threshold in the atmospheric carbon-di-oxide (CO2) concentration, which surpassed 400parts-per-million (ppm) in May 2013. The mainstream financial analysts are taking their cues from the Carbon Tracker Initiative, a London-based NGO that has carried out ground-breaking work linking climate change and the potential value risk in the listed fossil fuel companies, which has warned,

"regulations to limit CO2 could significantly impact the market value of fossil energy companies, as it becomes uneconomic to extract their fossil."
The NGO has also warned 80 per cent of fossil fuel reserves need to be left in the ground in order to avert the worst effects of climate change.

"As stated climate goals [of the need to stay below a 2 degree C rise in temperature] become reality, these resources are worthless financially, but it is also true that they do not contribute to sustainable development in the extent and the pace we want," said Meisingset of Storebrand.

An environmental lobby group, 350 dot org founded by Bill McKibben, seems to have played a key role in these market reactions. For almost a year now, McKibben has been leading the campaign to divest from fossil fuels specifically the equity or debt issued by the 200 largest oil and gas companies that have a combined market capitalization in excess of four trillion dollars.

Meantime, as financial institutions divest from the fossil fuel sector, concerned citizens are investing in nature and discovering the hidden wisdom of 3.8 billion years. Janine Benyus, a science writer and consultant founded the not-for-profit, Biomimicry Institute in 2006. Her team of researchers, scientists, architects and innovators are mimicking nature to design and engineer sustainable technologies.

An electric train built in Japan was modeled after the beak of kingfishers that dive from the air into bodies of water to catch fish with very little splash. Not only is the train much quieter, but it also uses 15 per cent less electricity even as it travels 10 per cent faster.

In Harare Zimbabwe engineers are creating sustainable buildings that emulate termite hills. These buildings use 90 per cent less energy for ventilation than conventional buildings its size, saving the building owners over 3.5 million dollars in air conditioning costs.

Mimicking the unique frequency-modulating acoustics of the dolphins, a company called EvoLogics has developed a high-performance underwater modem for data transmission, which is currently employed in the tsunami early warning system throughout the Indian Ocean.

Champions like Richard Louv is also creating far-reaching ripples across the nature movement. Louv's relentless quest to connect children with nature has prompted a United Nations resolution declaring that children have a human right to experience the natural world. It was created at a World congress of the International Union for the Conservation of Nature (IUCN), meeting in Jeju, South Korea, attended by more than 10,000 people representing the governments of 150 nations and over 1,000 non-governmental organizations.

As institutions and citizens are becoming more conscious of the environmental crisis, they are beginning to realize the value of nature, and I feel more hopeful now than ever before about leaving behind a better planet for our children and grandchildren. The Earth Charter (2000) says, "We have an obligation to pass on the Earth to the next generation in as good a condition as it was when we first received it."

My next sequel will focus on the intrinsic values of nature and my own emotional connection with nature.

Mimicking Nature's Wisdom