STOCKTON SPRINGS — On Thursday, Maine’s Joint Standing Committee on Appropriations and Financial Affairs will hear testimony on whether the state of Maine should divest itself from the fossil fuel industry.

I have 31 years of investment experience, and I will testify in support of the bill, L.D. 1461.

Bill McKibben, the co-founder of 350.org, says, quite succinctly, “If it’s wrong to wreck the climate, then it’s wrong to profit from that wreckage.”

Trillium Asset Management, the investment firm where I work, has managed sustainable investment portfolios for individuals and institutions since 1982. In our experience, fossil fuel-free investing is a credible investment approach.

Our firm has clients throughout Maine who are concerned with protecting the environment.

For many years we have invested client assets in Coastal Enterprises, a community development financial institution based in Wiscasset. The Maine Women’s Fund has been a Trillium client for 18 years.

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There is a long history of investors aligning their investments with their values.

You may know that Maine’s retirement system divested from South Africa in 1987, and the Legislature mandated divestment from the Republic of Sudan in 2007.

Today, many investors believe that they have an ethical obligation to employ this same divestment approach with companies involved in fossil fuels, believing that it is simply not acceptable to profit from a business inherently designed to accelerate climate change.

I have testified in support of fossil fuel divestment measures in Massachusetts and in Washington, D.C., and have heard arguments that divestment from fossil fuels could potentially increase risk and lower returns because you are narrowing your investment universe.

Recent independent studies have shown, however, that investors can go fossil fuel-free without major negative impacts on portfolio performance.

The investment firm Aperio Group determined that over rolling 10-year periods, from 1988 to 2012, excluding all fossil fuel companies would have an annual standard deviation from its benchmark of just over half a percent, which was virtually no riskier in terms of volatility.

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They also report that over a 10-year period, a carbon-free portfolio outperformed its benchmark 73 percent of the time.

MSCI, a leading provider of investment decision support tools, looked at the impact of excluding companies owning carbon reserves from one of its index funds, the MSCI All Country World Index. It determined that over a five-year period, the active return differential was 1.2 percent better for the same index without fossil fuel investments.

At Trillium, our fossil fuel-free portfolios have performed in line with the Standard & Poor’s 1500 benchmark – net of fees – since their inception in January 2007.

We work to mitigate risk and also improve the sustainability of portfolios by investing in green power generation – solar, wind, biofuels, geothermal – through finding bigger companies that have parts of their business in green/renewable sources of energy.

Many clean technology and industrial companies provide energy-efficiency products such as LED lighting, power management and commercial building energy-efficiency controls.

Also within the industrial or technology sectors, we can find energy storage investments such as hybrid car batteries, electric grid distribution and transmission companies – some that are plays on bringing renewable energy to the power grid. Water and geothermal utilities can be evaluated as potential substitutes.

The cost of transitioning a portfolio out of fossil fuel stocks over a three- or five-year period should be relatively inconsequential, as there is normal portfolio trading that should occur over that time period. This allows investment managers the opportunity to swap fossil fuel investment into other parts of the investment universe, with minimal additional cost.

I believe that an investment portfolio can provide competitive returns over the market cycle, while managing a conscious choice to avoid fossil fuel investment exposure, and I am pleased to know that Maine is exploring that option.

— Special to the Press Herald


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