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Managing the risks of exposure to fossil fuel companies Page 5 of 5
News pointed out that much of the data to be released "will be comprised of data and analyses Exxon
has [already] published in publicly available filings or the corporate website."
As these examples show, engagement has limits. In the current environmental situation, which
scientists say is increasingly dire, incremental actions to improve disclosure and risk management
may not add up to a viable strategy for controlling the pace of climate change. Some stakeholders
argue that there is only one way to send a clear message about the severity of climate change to fossil
fuel companies: outright divestment.
Some divestment advocates draw a parallel to the successful campaign to isolate the South African
government during the apartheid era, arguing that there is a moral imperative to take meaningful
action on climate change while it is still possible. Furthermore, it is seen as highly unlikely that any
amount of incremental progress on environmental issues will ever allow fossil fuel companies to alter
the fundamentally unsustainable nature of their business model.
IW Financial can assist with divestment and portfolio realignment
There are many reasons why it may not be practical for investors to immediately begin shedding fossil
fuel stocks from their portfolios, including tax implications, fiduciary responsibilities and the need to
account for portfolio risk profiles. However, stakeholders can still take action without launching into
an all-out selloff.
IW Financial has collected comprehensive information on public companies' environmental and
climate change policies, as well as the governance structures that are in place to implement these
policies, including board and senior officer involvement. Our in-depth corporate sustainability
research allows us to effectively assist clients with either divestment or more nuanced approaches to
portfolio realignment.
Recently, IW Financial has worked with clients to design and implement index based solutions that
address the issues of carbon and climate change in various ways. Solutions provided range from basic
solutions that avoid investment in all companies with proven carbon reserves to more robust solutions
that seek to identify those companies with progressive policies on climate change management and to
avoid those companies at risk of significant stranded carbon assets.
We have seen first hand how the trend toward ESG integration has accelerated as more capital market
participants have come to recognize the value of considering extra-fmancial factors when making
investment decisions. Today, more than 10 percent of all professionally managed assets in the U.S.
marketplace are invested "responsibly," according to US SIF—The Forum for Sustainable and
Responsible Investment.
The growing focus on the risks faced by fossil fuel companies is yet another manifestation of this
trend.
IW Financial software is protected by U.S. software patents 7,003,503
and 7,499,901 B2.
©2016 IW Financial - All rights reserved.
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