Socially Responsible Investing
TIA is pleased to be able to offer its clients highly sophisticated investment filters that readily accommodate a wide variety of personal preferences in their portfolios. Clients with socially responsible investment (SRI) goals may elect to opt out of or into specific companies, types of companies or business sectors. TIA’s quantitative yet flexible investment process formalizes these filters and systematically adjusts your portfolio to take into account the choices you make. In the process, we maintain your asset allocation, structure, diversification, and continue to tax manage your account to maximize your after-tax return. For those concerned about the impacts of climate change, we provide the following more specific portfolio design options.
Many investors are not merely investing their money wisely so that they have what they need: they are also investing for the benefit of their children, grandchildren and future generations. We know that carbon dioxide emissions and other greenhouse-type gases are trapping heat within the atmosphere at an enormous rate, which is warming our climate and posing enormous risks to that future. Investors are legitimately concerned about how this problem will impact not only their investments but, more importantly, the world that their children and grandchildren will need to inhabit. Increasingly, investors want to find ways to invest in the clean economy that can impact our ability to address this issue. We have designed the Future Generations portfolio as a way to enable our clients to not only divest from those companies and products which worsen carbon emissions but to replace those securities with those of companies pro-actively generating clean energy.
California’s AB32, The Global Warming Solutions Act, was landmark legislation signed in 2006 by Governor Arnold Schwartzenegger that requires California to develop programs that reduce carbon emissions. The law fights global warming by establishing a comprehensive program to reduce greenhouse gas emissions from all sources throughout the state, with a goal to reduce the state’s greenhouse gas emissions to 1990 levels by 2020 and to 80 percent below 1990 levels by 2050. This legislation marked a watershed moment in California’s and possibly America’s history and sets the stage for the country’s transition to a sustainable, low-carbon future, by “aiming to improve the environment and natural resources while maintaining a robust economy.”
A component of AB32 involves the implementation of California’s Cap & Trade program, which was formally launched in 2012 as one of the strategies California employs to reduce the greenhouse gas (GHG) emissions that cause climate change. Under the cap-and-trade, an overall limit on GHG emissions from capped sectors and facilities was established and those entities subject to the cap were required to purchase permits in order to emit carbon or equivalent emissions. Starting in 2013, regulated entities were able to trade permits (allowances) to emit GHGs and to purchase those they needed at public auctions. More recently, California joined the Western Climate Initiative to collaborate with British Columbia, Ontario, Quebec and Manitoba to implement a uniform cap and trade program that is both cost-effective and broader ranging at reducing emissions. The WCI coordinates administrative and technical support for its participating jurisdictions’ emissions trading programs. By the end of the 2014 season, proceeds raised under California’s Cap & Trade program were under $100 million. By the end of 2018, just four years later, more than $8 billion had been raised by the cap and trade program and proceeds allocated by the California Air Resources Board to a range of abatement programs, despite the fact that carbon emissions continued to trade at the low price of about $15/ton.
In response to this carbon pricing mechanism, TIA designed a special “carbon-priced” investment filter for those clients that would like to design their portfolio to reflect the likely implementation of carbon pricing throughout the market. TIA calls this filter the Future Generations™ strategy and it applies a price of carbon filter to the selection of securities for clients’ separately-managed portfolios. If one believes that we are on the threshold of a monumental shift in the energy sector, where the costs of carbon emissions will no longer be externalized for free and those emitting carbon will be forced to pay for the costs that they extract on our communities, then one can protect their portfolio from that by electing to implement this filter for some or all parts of their portfolio. Click here to learn more about implementing a Future Generations portfolio design for your account.