[New York, NY] - Domini is proud to announce that we have signed the Stockholm Declaration, re-affirming our support for the United Nations Sustainable Development Goals (UN SDGs). The Stockholm Declaration was organized by the GRI and UN Global Compact in May 2017. The pact allows the global investment community to announce their commitment to using the UN SDGs as a framework for investing. The declaration also serves as a call for a reporting framework that will allow investors to record progress towards the common goals. The full declaration can be read here.
The UN SDGS are a collection of 17 targets that form a framework for creating and maintaining sustainable development by 2030. They were approved by the UN General Assembly in 2015, and set an ambitious agenda to reduce inequality and fight poverty, protect resources and health, and combat climate change. Explore the SDGs here: http://www.un.org/sustainabledevelopment/
Domini’s core goals of universal human dignity and ecological sustainability are fully aligned with the UN SDGs, and our impact investing standards map to the goals. Reaching the SDG targets will create strong and resilient environmental and social, as well as financial, systems. However, according to the UNCTAD, achieving them will require an estimated investment of $5-7 trillion globally. This level of investment is possible, as each of the 17 goals present myriad business and investment opportunities, but it remains important for investors to work together to disclose and promote investment to meet the goals.
Even though there are serious environmental and social impacts of our appetite for electronics, it is hard to resist the lure of the latest and greatest devices. This season—with sales and wish lists and new model releases—is by far the hardest. So what can someone who cares about their impact do in the face of a culture of shop, shop, shop?
The most obvious choice is looking for alternatives to electronics. Research suggests that experiences make us happier than objects and our attachment to personal electronics has reached the level of addiction.
But there is a gift option which combines gadgetry with experience: give your kids a broken phone.
Hear me out. As planned obsolescence fuels device manufacturers’ profits, our first reaction to a cracked screen or a battery that won’t hold its charge is to get a new phone or tablet. Insurance may even cover the cost. How many broken-yet-not-so-old phones and tablets do you have lying around? Surely at least one.
Many manufacturers have made it increasingly hard to do something so seemingly simple as changing a battery, but both batteries and screens can be fixed! By you and your offspring! This can be a fun and educational activity that results in a useable device. The key is wrapping your electronic hand-me-down together with a repair kit from iFixit. This site sells not just the replacement parts but also the proprietary tools needed to open your gadgets. It also provides community-sourced written and video instructions to guide you along the adventure.
And I can tell you from personal experience, an adventure it is. I managed to replace a battery on my 4th generation MP3 player. My wife and I also managed to replace the battery on her smartphone. The adhesive used to keep us from replacing these batteries is no joke, but it can be conquered. These repairs aren’t fool-proof but each one is a unique learning opportunity. A sense of humor helps, but you will genuinely enjoy the next level of ownership you feel after having invested sweat and tears into your devices. It’s like making your own pie crust instead of buying one – sure, you could grab one from the freezer, but where’s the fun in that?
So this holiday season, when considering what to get your budding engineers and designers, don’t overlook your discarded electronic drawer: the source of the perfect gift.
Your voice can be heard. International leaders and policy makers are at the UN climate summit, currently underway in Bonn, Germany. It was at this summit in 2015, then in Paris, when nearly 200 countries submitted proposals for cutting their greenhouse gas emissions. With Syria joining the Paris agreement on climate change this month, we are optimistic about progress, but at the same time saddened by the lack of support by our country.
History has shown that when government action is lacking, private enterprises and citizens fill the gap. We are pleased to report that a delegation of US businesses, cities and states led by California Governor Jerry Brown and former New York Mayor Michael Bloomberg carry our message globally - America is still in.
Domini has signed the “We Are Still In” pledge alongside 1,219 state and local officials, businesses, investors and universities, signaling our continued commitment to the emissions reduction goals of the Paris Agreement and the preservation of our planet. Climate change is one of the most pressing challenges we face today. Domini supports the global transition to a low carbon future. We consider the impact of climate change and its risks across all our mutual funds through implementation of our Impact Investment Standards and engagement with corporations and public policy makers.
We encourage you to get involved, spread the word using the tag #StillIn and consider the effect that you have on our planet.
In July 2010, the United Nations General Assembly explicitly recognized the human right to water and sanitation. This notion has formally been incorporated into United Nations Sustainable Development Goal 6. Protecting and restoring water-related ecosystems and improving water quality by reducing pollution are crucial components of this goal.
Seven years later, however, this basic human right still needs protection at the legislative level here in the United States.
The 1977 Surface Mining Control and Reclamation Act was strengthened under President Obama at the end of 2016 with the Stream Protection Rule, a regulation that essentially restricted coal companies from dumping mining waste into streams and waterways. At the time, the Interior Department stated this rule would protect 6,000 miles of streams and 52,000 acres of forests by keeping coal mining debris away from waterways.
However, on February 2, 2017, the Senate voted to repeal the Stream Protection Rule, and two weeks later, President Trump signed the repeal into law.
March 22 is officially recognized by the United Nations as World Water Day, with a specific focus this year on wastewater. Water pollution is a serious and ongoing threat to the environment and the health of surrounding communities. Since Domini’s inception, coal-mining companies have been excluded from our portfolios by our Impact Investment Standards. The abundance of factors connecting coal mining to water pollution and climate change are just some of the many reasons Domini has never invested in these companies.
Today, on World Water Day, we acknowledge the immense influence humans have on the fragility of the global water system and, as investors, recognize the responsibility that we have to help protect it.
If you sit on the board of a publicly traded company, there is only one time of year when you must face your shareholders. For most companies, that time is at the spring annual meeting. Since the 1960’s, shareholders have raised key issues of concern at these meetings, from napalm production to racial discrimination to climate change. On behalf of our fund shareholders, we have submitted more than 250 shareholder proposals over the past 22 years, ensuring that your voice is heard.
The shareholder proposal is a tool to help us persuade companies to see our point of view. They are conversation starters that get executives’ attention, and hold it long enough for us to make our case and, hopefully, effect change. This year, these conversations led to agreements with Best Buy, First Solar, and Target. We also worked with our colleagues at Clean Yield Asset Management to withdraw our proposal at Whole Foods. You can read more about these agreements, or download our Social Impact Update for the First Quarter.
When we are unable to reach agreement, the process reaches a public stage. Our proposal is published in the corporate proxy statement and then put to a vote at the annual meeting. There, we are provided the opportunity to share our views with shareholders, senior management and the board of directors in a brief speech. This season, seven of our proposals went to a vote.
Domini Proposals that Went to a Vote this Season
|3M||De-link executive compensation incentives from share buybacks||6%|
Indirect political contributions disclosure
|Chipotle Mexican Grill||
Political lobbying disclosure
Indirect political contributions disclosure
|UPS*||Political lobbying disclosure||23%|
*Domini is serving in a supporting role in these engagements.
The Chipotle annual meeting was a lively one, following a nationwide rash of e-coli and norovirus outbreaks that has battered confidence in the brand. Our speech began with a reminder that issues of sustainability, including decent working conditions and healthy ecosystems, are key to the long-term success of this company. After several years, however, the company still fails to provide comprehensive information to help us understand how it is managing its key sustainability risks. Chipotle says they’d rather do the work than tout their successes. Our speech sought to educate the Board about the critical importance of sustainability reporting to risk management:Sustainability reporting is about accountability, not marketing.
We were told that Chipotle will be releasing more information around sustainability and that we will be happy with the results. Our proposal’s strong 43% vote should send a strong signal that our message resonates with the company’s shareholders.
The Domini Social Bond seeks to have a positive impact across multiple key themes, including affordable housing, education and climate mitigation. In the second quarter, securities Domini characterizes as “high impact” represented 14.7% of the Fund’s total portfolio, including the following two examples, which were added to the portfolio during the quarter.
In the second quarter, the Fund purchased a bond issued by the Indiana Finance Authority. Proceeds from this bond will finance construction of a new public mental health care facility, the Neuro-Diagnostic Institute and Advance Treatment Center, for medically underserved populations in the state. Within the last 50 years, Indiana’s supply of inpatient psychiatric beds declined significantly from 6,000 to 800 in 13 state-operated facilities for patients with mental health and developmental disabilities. The new facility will be Indiana’s flagship mental health facility for those with mental illness and addictions.
The Fund holds a general obligation green bond issued by the State of Massachusetts. Proceeds from this bond are used for climate adaptation and mitigation, including storm water management, energy efficiency and conservation in state buildings, open space protection, habitat restoration and preservation, and environmental remediation and river revitalization projects throughout Massachusetts. In 2013, Massachusetts became the first state to issue a green bond. The state has provided increasingly transparent reports each year to allow investors to measure the environmental impact of these issuances.
In a post-Paris Agreement world, one would expect to have a clearer idea of what bonuses and drawbacks the major sources of renewable energy might have for the environment, but that is not necessarily the case. Every few weeks I see an article proclaiming “Denmark leads charge in renewable energy” or “Costa Rica powered by 100 percent renewable energy for over 75 days.” At first glance, this sounds great. Global societies are reaching feasible models of large scale, renewable energy production. However, phrases like “renewable energy” have been coopted by popular culture to represent the best alternative to fossil fuels. It is important to consider the fact that not all means of harnessing renewables are beneficial for the ecosystems in which they are implemented.
In 2014 I spent six weeks on Barro Colorado Island in Panama as a research assistant at the Smithsonian Tropical Research Institute. Depending on the week, there were typically between 20-50 scientists and assistants staying on the island. During meals, many scientists would sit around and, being scientists, talk science. They came from a broad number of specialized fields, so the topics of discussion were far ranging. Not being a scientist, I often found myself in the position of explaining that “I’m not a scientist, but I play one on TV,” and participating as best I could. At the time, there was a news story being passed around that touted Costa Rica’s 80%+ use of renewable energy sources, so I brought it up, and was surprised to find out that many of the scientists were not happy about the achievement.
In Costa Rica, the majority of their energy comes from conventional, large-scale hydroelectric power plants. Hydroelectric power generation has various environmental and social impacts depending on the size and method of production. In some cases, micro or small-scale hydropower production has the potential to provide clean energy with a small ecological and social footprint. However, in other cases, conventional large-scale hydropower production can devastate local ecosystems and can be as bad or worse for the environment than coal plants. One such method is to create artificial reservoirs from which water is released through a dam. This method allows more control over energy production, but is often highly destructive. The flood plains become filled with dead and rotting plant matter which release large amounts of methane into the atmosphere, the migratory patterns of fish are disrupted, and buildups of silt can choke the oxygen out of the stream, causing dead zones.*
A number of the scientists at the Smithsonian Tropical Research Institute had worked in Costa Rica and explained that the production of “renewable” energy had disrupted local ecosystems and wreaked havoc on plant and animal populations that they had previously studied. That was the first time I realized that when it comes to energy, going green does not necessarily equate to going clean.
Despite our varied concerns with large scale hydroelectric power production, Domini recognizes the need and immense value that electricity creates for society at large. When reviewing utilities that focus on hydroelectric power production, we evaluate the size, scale and location of the production, potential or ongoing controversies with the displacement of communities or indigenous peoples, ecosystem damage, uncertainties with the production of carbon and methane emissions, and other concerns among the wide array of environmental and societal risks that are associated with large-scale hydropower.
My intent in writing this piece was to remind readers to always look beyond the headlines. When I went to find the article that I had brought up in the cafeteria in Panama, this post’s origin story if you will, I found that there were plenty of articles out there in 2014 that talked about the ecological consequences of damming rivers, but I had just never seen them. Just because a headline is using the word “renewable” does not mean a project is without controversy. Ironically, I couldn’t find the original story. I guess good headlines go viral then die, while good articles are often left for dead but live forever. As we move towards greater and greater adoption of renewables, it is important to stay informed and understand which sources can bring us to a more sustainable future.
For many years, Domini has incorporated concerns about the environmental risks of companies owning and producing fossil fuels into our investment standards. Over time, we have gradually eliminated an increasing number of these firms from our holdings as our concerns about a variety of environmental and safety issues, including climate change, have increased.
We have never held coal-mining companies, and have historically approved very few major integrated oil companies. In recent years, we have excluded the few integrated oil companies that we had previously approved, and eliminated an increasing number of the smaller oil and gas companies from our list of eligible investments, due to concerns over safety or the environment.
We had historically favored companies focused on the production of natural gas because it burns more cleanly than oil. But as innovation took hold and hydraulic fracturing became widely used, we began to differentiate between the records of these natural gas companies. Due to increasing concerns about methane emissions, safety and community health issues, we gradually reduced the number of natural gas companies approved, until we divested from this segment of the energy industry entirely.
We exclude companies that are substantial owners and producers of oil or natural gas reserves and are included in the Integrated Oil & Gas or Oil & Gas Exploration & Production Industries as defined by the Global Industry Classification System (GICS), as well as companies significantly involved in coal mining.
We have made each of these decisions in light of the financial, environmental and moral concerns associated with fossil fuels and in recognition that an increasing portion of the responsible investment community has found divestment a productive avenue to further debate on climate change, one of the most important and difficult issues of our time.
I was first introduced to the concept of laboratory-grown meat a couple of years ago. My son’s fifth grade glass was studying “foods of the future.” In response to the challenges of climate change and population growth, the class had identified two alternatives to our traditional diets: lab meat and insects. I have to say I was somewhat less than enthusiastic about either option, and the less said about eating insects, the better. The kids, however, were very excited and fearless to try something new that might protect the environment. It was inspiring, but unpalatable.
I came across lab meat again while speaking at the SXSW Eco Conference in Austin, Texas last fall. I think the kids were on to something.
What is lab meat, or “cultured meat”, the term New Harvest, a non-profit dedicated to the incubation of these new technologies, prefers? According to New Harvest, “Cellular agriculture is the production of agricultural products from cell cultures. [It] allows us to make milk, eggs, meat, leather, fur, rhino horn, and any other animal products from cell cultures rather than from animals.”
The basic insight is that we now know how to produce meat without the animal. You can think of an animal’s body as a machine designed to grow muscle from cells, but that doesn’t mean we need to continue to treat animals like machines. We can learn from these natural processes and duplicate them in a laboratory or factory, beginning with a cell culture, harmlessly taken from the animal. Once brought to scale, the meat production facility of the future will look like a brewery, filled with shiny steel tanks suitable for public tours, in contrast to the factory farm or slaughterhouse of today, that are, conspicuously, out of sight, out of mind.
Why do we recoil at this? One reason is that the meat and dairy products we eat come to us well packaged and clean. We don’t see how they were produced, and frankly, we don’t want to know. But ignorance is not always bliss.
Consider the egg, a staple of diets around the world and a symbol of the traditional family farm. Today, the vast majority of American eggs are produced on “battery farms,” where, according to The Humane Society of the United States, each hen is provided “67 square inches of cage space—less space than a single sheet of letter-sized paper on which to live her entire life.” As entomologist Dave Goulson puts it in “Filthy Flies,” a chapter in A Buzz in the Meadow (highly recommended, by the way): “These are among the most unpleasant places that man has thus far managed to create. If you’ve never been in one, count yourself lucky; continue to avoid the experience, and stop buying cheap battery-farm eggs. Battery farms are vast, dusty, foetid places.”
According to Farm Animal Investment Risk and Return (FAIRR), a new coalition of investors working to address the financial risks of the factory-farming system, approximately 70 percent of the world’s farm animals, and 99 percent of US farm animals, are now factory farmed. FAIRR points out that factory farming is the number one reason for the rapid spread of bird and swine flu, and is accountable for 80 percent of all antibiotics used in the US. The World Health Organization (WHO) warns that overuse of antibiotics could threaten the achievements of modern medicine and lead to a “post-antibiotic” era, with significant risks to human health.
Livestock produce more global greenhouse gas emissions than the transportation sector. The World Wildlife Fund (WWF) claims that ruminant livestock account for between 7 percent and 18 percent of global methane emissions from human-related activities. Our food-production systems are massive users of water, and leading contributors to deforestation. A recent study found that atmospheric emissions of agriculture-related ammonia, from livestock waste and nitrogen fertilizers, now exceeds the effects of fossil fuel combustion emissions on our atmosphere’s nitrogen cycle, contributing to soil acidification, decreased biodiversity, and changes to the chemistry of lakes and streams.
One hundred and ten years after the publication of Upton Sinclair’s The Jungle, which exposed horrific working conditions in slaughterhouses, workers are still exposed to dangerous and unhealthy working conditions. And, of course, there is the welfare of the animals themselves, many of which live their lives in strict confines, as meat-producing machines.
All of this is bad enough without considering that the entire enterprise is designed to produce food for human consumption.
What can cultured meat offer? New Harvest claims these technologies can produce more nutritious meat while dramatically reducing the environmental impacts, including greenhouse gas emissions, water use, and water and air pollution. It claims that cultured meat can be produced in a clean, controlled environment that should dramatically reduce the risk of food-borne illnesses. And unlike factory farms, which take vast amounts of acreage, cultured meat facilities can expand vertically. Imagine being able to eat a juicy burger without having to kill an animal.
Although we may be ten years away from seeing cultured meat in the supermarket, plant-based meat and dairy products are already on the shelves. I learned at the recent Ceres conference in Boston that General Mills has an investment in Beyond Meat, a company producing a variety of plant-based meat products. Kite Hill, sold at Whole Foods, makes milk, cheese and yogurt entirely from almonds; Hampton Creek’s “Just Mayo” uses a powder made from Canadian yellow peas instead of eggs; and Impossible Foods is working on a burger that tastes like beef, made from plants. This is not your standard veggie burger. Impossible Foods is substituting the basic building blocks of meat with proteins and nutrients taken from plants. It is a process that begins at the molecular level. According to a Wall Street Journal taste-test, it currently ranks with turkey burgers. Not quite there.
Why, you might ask, would anyone want to turn plants into meat, when we can simply become vegetarians, or better yet, vegans? What is the easiest and most direct path to a more sustainable food system: converting the vast number of the world’s meat-eaters to veganism, or providing a delicious burger that satisfies our desire for beef, with relatively no environmental impact? Plant-based meat is a bet on the latter path of least resistance. As Impossible Foods puts it on their website, “while creating the burger, we left a few things out: cholesterol, hormones, antibiotics, and slaughterhouse contaminants. We hope you understand.”
The biologist E. O. Wilson believes we need to permanently set aside half of the Earth for wildlife if we are to avoid a manmade mass extinction event on the scale that wiped out the dinosaurs. This idea requires us to rethink how we feed ourselves. According to the Food and Agriculture Organization (FAO), 26 percent of Earth’s ice-free land is used for livestock grazing. WWF claims that 25 percent of global land use, land-use change and forestry emissions are driven by beef production, including conversion of forests in the Brazilian Amazon. If we are to preserve biodiversity for its own sake, as well as for future generations, we must make some hard choices. The FAO reports that “globally, there is enough cropland to feed 9 billion in 2050 if the 40 percent of all crops produced today for feeding animals were used directly for human consumption.”
These technologies are in their early stages, and success is by no means guaranteed, but they’re getting closer every day. What will consumers think? Will these new products suffer because of the emphasis on their production methods, while traditional meats benefit from our illusions of how our food is actually raised? Will traditional food companies transform into some of the most sustainable companies in the world? And, I’m sure many will wonder about genetic engineering. To date, the technologies discussed here do not require genetic engineering. But will GMOs play a role in these technologies going forward, and can those risks be appropriately managed?
By the time my son and his classmates reach my age, the human population will be approaching 10 billion. If these people are going to eat, they are going to need a radically transformed food production system. The food of the future is coming, and I, for one, am ready.
Fixed-income investments provide an important opportunity to create public goods, address a wide range of economic disparities in our society, and to fill certain capital gaps – funding needs that have often received insufficient attention from investors. We seek to address some of these disparities through the investments of the Domini Social Bond Fund, while simultaneously seeking to achieve competitive returns for our Fund’s investors.
The following provides an overview of the social and environmental objectives of the Fund, particularly those addressing access to healthcare, climate change and affordable housing.
Standard Setting by Asset Class
Stock ownership offers the opportunity to set standards for corporate behavior and to influence management through the exercise of shareholder rights. Fixed income investments offer a different set of opportunities for long-term, lasting impact.
If you think of a bond as a loan, the key questions for responsible lenders should be: To whom am I loaning my money and for what purpose? Despite some of the complex details of the fixed income markets, we believe these are the threshold questions that responsible investors should ask.
Domini’s Global Investment Standards are directed towards two long-term goals: universal human dignity and the preservation and enrichment of the environment. The standards applied to the Domini Social Bond Fund’s portfolio focus on three key themes:
- Increasing access to capital for those historically underserved by the mainstream financial community
- Creating public goods for those most in need
- Filling capital gaps left by current financial practice
These three themes flow from our belief that healthy economies must be built on a strong foundation of fairness and opportunity for all.
We look to diversify our holdings in the Fund across a broad range of social issues, including affordable housing, small business development, education, community revitalization, rural economic development, the environment, and health care.
Below, we provide examples of several types of fixed income investments and the standards we utilize to select the Fund’s holdings.
Governments around the world issue bonds (or “debt”) to finance a wide variety of public goods including education, infrastructure, national defense, the judiciary and social welfare. Although sovereign debt is issued to finance such public goods, debt raised by governments with a history of corruption can be misallocated and misused at the expense of the well-being of the nation and their own citizens.
We therefore use indicators of political freedom and corruption, including Transparency International’s global corruption index, to eliminate from consideration certain countries’ bonds. We use these threshold indicators to help us to identify a country’s ability and willingness to utilize the proceeds of these offerings for proper purposes.
In addition, we will not invest in debt issued by certain “tax haven” jurisdictions -- countries characterized by low or no taxes, financial secrecy laws, and light regulation. Tax havens can help to facilitate criminal activity, including allowing dictators to shelter embezzled funds, and wide scale tax avoidance by corporations and wealthy individuals. Tax havens foster global economic inequality, which is destabilizing to the financial markets and to society.
We do not invest in U.S. Treasuries or Russian government debt, as these instruments partially finance the maintenance of these countries’ nuclear weapons arsenals. The United States and Russia possess over 90% of the world’s nuclear warheads. We believe they carry a special obligation to eliminate this global threat.
We generally consider municipal bonds – debt issued by states, cities or counties or other quasi-public organizations-- to be closely aligned with our investment objectives, particularly when they are issued by jurisdictions with below-average resources. They can help to finance the creation of substantial public goods, such as transportation infrastructure, educational facilities, brownfield redevelopment, technical assistance for small enterprises, and other services needed to close the gap between these localities and the rest of society.
Municipal bonds can also help to ensure broad access to environmentally beneficial technologies to all members of society. We therefore look to invest in municipal bonds that generate environmentally positive impacts for underserved communities. Municipal issuers have a key role to play in terms of climate adaptation, disaster prevention and recovery. We are seeking to purchase these types of bonds as well.
We will seek to avoid purchasing the relatively few government-issued bonds that are explicitly issued to finance the development of projects, such as nuclear power plants or casinos, which are fundamentally misaligned with our investment objectives.
The Domini Social Bond Fund has maintained a long-term commitment to affordable housing, which the Fund supports primarily through the purchase of securities backed by pools of mortgages.
Fannie Mae and Freddie Mac, two U.S. government-sponsored entities, play a particularly prominent role in increasing access to affordable housing and sustaining the housing recovery in this country. Among the range of debt instruments they offer, those targeted to low income neighborhoods, low-income borrowers, multi-family housing or specific community revitalization projects have a particularly direct social impact. Also, these institutions have specific programs to help homeowners stay in their homes or otherwise avoid foreclosure. These efforts have helped to stabilize neighborhoods, home prices, and the housing market.
Green Bonds are designed to finance projects and activities that address climate change or serve other environmentally beneficial purposes. These environmentally themed bonds are rapidly growing as a new asset class, with issuers including supranational banks, governments, and corporate entities. The market for green bonds more than tripled in 2014, rising from only $3-5 billion per year between 2007 and 2012 to $39 billion in 2014.
Today, we are cautiously optimistic about the development of this new asset class. The stakes are high, however, as this market develops. We are concerned, for example, that an overly aggressive use of the word “green” could conceal environmentally harmful impacts, threatening the credibility of this important avenue for financing critical unmet environmental needs. We therefore established our own guidelines to identify appropriate green bonds for the Fund, considering the social and environmental record of the issuer as well as the specific purpose of the bond.
Our Approach to Green Bonds
The following are some of the key questions Domini asks when evaluating green bonds:
- Who benefits from the proceeds of the bond? We favor investments that generate positive impacts for people and communities in need, with a special focus on vulnerable groups, including low-income populations, minorities, and immigrants.
- Can the proceeds from the bond contribute to innovations that address serious sustainability challenges? We favor investments such as those mitigating the impacts of fossil fuels in energy-intensive industries, promoting energy efficiency, or otherwise addressing environmental and social justice issues.
- What is the quality of the issuer’s relations with communities, customers, employees, suppliers and the environment? Does the issuer maintain credible due diligence processes to address environmental and social risks?
We will seek to avoid the following:
- Bonds that finance projects with substantial sustainability concerns such as first-generation biofuels, waste-to-energy plants using toxic substances, or projects that prolong fossil fuel dependence such as carbon capture sequestration or refurbishment of coal power plants.
- Bonds issued to finance nuclear power, activities related to the mining of coal or uranium, or the production of weapons, tobacco, alcohol or gambling.
Significant capital will be needed to finance the transition to a low carbon economy and adapt to the physical impacts of climate change. For example, while current investments in clean energy alone are approximately $250 billion per year, the International Energy Agency has estimated that limiting the increase in global temperature to two degrees Celsius above preindustrial levels requires average additional investments in clean energy of at least $1 trillion per year between now and 2050.
We believe that the real estate industry is in a unique position to reduce greenhouse gas emissions through energy efficiency improvements that are low cost and that create value within the underlying asset. We have therefore purchased several bonds designed to finance green buildings. In particular, we are looking for the U.S. Green Building Council’s LEED (Leadership in Energy and Environmental Design) certification, a comprehensive green building certification program that recognizes best-in-class building strategies and practices.