Could a financial tool geared toward climate-conscious investment be the next generation of finance? During today's OnPoint, Peter Lehner, executive director of the Natural Resources Defense Council, discusses NRDC's new stock market index, launched along with BlackRock and FTSE Group, that excludes fossil fuel companies. He talks about the impacts a fossil fuel divestment strategy could have on Wall Street.
Monica Trauzzi: Hello, and welcome to OnPoint. I'm Monica Trauzzi. With me today is Peter Lehner, executive director of the Natural Resources Defense Council. Peter, thank you for coming on the show.
Peter Lehner: Great to be here, Monica.
Monica Trauzzi: Peter, over the last year, NRDC has launched a stock market index that excludes fossil fuel companies. You're promoting it as a new tool to sort of help climate-conscious investors match their financial interests with their values. How much demand is there out there for a tool like this and for climate-conscious investing?
Peter Lehner: We're seeing a lot of interest since our launch, and frankly, there was a lot of interest before. Before, though, it was often hard for an investor to match their desires, their motivations and their morals with their financial responsibilities, and it was complicated. They might not know what to do.
We created a fund with one of the world's largest index providers, FTSE, F-T-S-E, and one of the world's largest asset managers, BlackRock, with a very transparent system of how the -- how it's determined whether the companies are in or out. And now, that will be easily available in a low-cost way to other investors.
Monica Trauzzi: Some might question whether divesting from fossil fuel companies is smart ... though, because a lot of these companies are among the highest-earning in the world. So how do you make the argument, then, for divesting from these high earners?
Peter Lehner: Well, first of all, this particular fund, unlike others, also, is very low fee. It will be transparent. People who are watching the financial world can see it on their screen and see the index. The index company, FTSE, also modeled it, how it would act in the past, and found that it tracks the underlying index of global equities quite closely. So this is going to be a fund that will be very financially secure.
Monica Trauzzi: And so the index has not officially launched yet? You were telling me --
Peter Lehner: That's right.
Monica Trauzzi: -- it launches in June?
Peter Lehner: It launches in June. The index -- no, the index has been launched. The investment vehicle with BlackRock will be launching in June.
Monica Trauzzi: Many individuals are invested in fossil fuels through their retirement funds. What does this index potentially do for those folks?
Peter Lehner: Well, this -- the original fund, the way it's created now, will be available to foundations and endowments and certain pension funds. We believe, given the amount of interest we've heard from talking about this, and the news about the launch of the fund, that there will be enough interest that there will soon be a vehicle that will be available to individuals, that you could put your own retirement savings or whatever else into the fund.
Monica Trauzzi: So what parameters did you use in deciding who to exclude from the fund?
Peter Lehner: That was one of the most interesting elements, because, of course, fossil fuels are -- touch so many aspects of our lives. We focused on those companies that own the actual reserves of coal, of oil and of gas that are in the ground, and whose main job is owning those and getting them out. There are many other companies that we do not exclude from the index, companies that use fossil fuels, or maybe companies that service the fossil fuel industry. You maybe make steel piping or something.
We focused on those companies that own the fossil fuel, because our point is that that fossil fuel, those carbon reserves have to largely stay in the ground in order for us not to have catastrophic climate change.
Monica Trauzzi: So you were mentioning to me before the show that whether, for example, a coal-fired power plant incorporates carbon capture and storage technology or not, it's irrelevant to whether they're included.
Peter Lehner: That's right. By and large, utilities are not excluded. Coal -- whether they use hydropower or wind power or coal power or anything else, are not excluded from the index.
Monica Trauzzi: Stanford University recently announced it would divest $18.7 billion of stock in coal mining companies, and there seems to be a growing movement among students and universities around the country to divest fossil fuel interests. What do you think about what we're hearing on campuses throughout the country?
Peter Lehner: It's terrific. You know, if you think about it, the college kids are the ones who are -- got more of their future ahead of them than -- than we do, and they are realizing that climate change is a big issue for them. It is probably the defining issue of what will -- what will shape their future.
So they are saying, we want to be part of a fossil-fuel-free future. And that is why we created this fund, so that it would be easy for foundations and endowments and others to be part of the future that we're advocating for, a future that is not dependent on fossil fuels. And even as we are showing out in the non-financial world that we can get off fossil fuels, we can have clean, efficient electricity, and cleaner cars, we are trying to show in the financial world, too, we can get off fossil fuels.
Monica Trauzzi: So this isn't just symbolic? I mean, you think it could have a material impact on fossil fuel companies and also on climate change, for example?
Peter Lehner: The real impact of the fossil fuel industries right now, even more than financial, is their influence on politics, on the policies that keep them in position, keep making sure they have their direct and indirect subsidies, and keep putting down efficiency and renewable energy. This is an opportunity to try to reduce that influence, and in so doing, help us create a cleaner future that we can all be a part of. So yes, I think it'll have a big impact.
Monica Trauzzi: Okay. Very interesting. Thank you for coming on the show.
Peter Lehner: Thank you, Monica. Great to be here.
Monica Trauzzi: And thanks for watching. We'll see you back here tomorrow.
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