At the Trottier Family Foundation, we recognize that impact investing is an important tool to de-risk projects with social and environmental impact and create systemic change. The realization that investment policy and core values must align established the begging of the Foundation’s sustainable investment journey, which began in 2015 by divestment (negative screening) of the endowment from fossil fuels which the Foundation has now fully divested. The next stage was positive screening and reviewing ESG policies of investment managers, encouraging improvements and more focused mandates. In 2018 we created the Foundation’s Impact Investment Policy and dedicated 5% of the Foundation’s endowment towards investment projects with catalytic impacts aligned with our social, environmental, or climate change missions. We’re currently working with investment managers to measure the GHG footprint of our portfolios and designing a strategy to reduce that footprint over time.

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Divestment allows Trottier Family Foundation to align its assets with its mission to create meaningful impact and support the mitigation of climate change and the transition to a low carbon economy. As the Foundation is investing in creating a better future, it was not responsible to keep investing in fossil fuel companies, from both a programmatic point of view as well as the fiduciary responsibility of climate risks tied to our endowment.

Financial perspectives:

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Reduction of exposure to overall portfolio risk: this includes risk of exposure to lower performing industry, and the potential value loss for companies with stranded assets in a carbon-constrained scenario. As such, divestment arguably reduces systematic risk and enhances risk adjusted financial returns.

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Opportunity to invest in a wide range of low-carbon investment opportunities, allocating capital to growing segments of the market.

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Divestment does not hurt returns: Divesting the Foundation’s assets from fossil fuels has been a long journey with asset managers (as of 2020 there are now more options); choosing the appropriate screens, thoroughly examining the assumptions behind them, and actively pursuing portfolios focused on higher performing ESG companies. The argument that divestment lowers financial returns is absolutely false and does not consider the effect of current changes (such as the shifts in the energy sector) on the market in the future.

One of the main arguments against divestment is the loss of engagement opportunities with those companies that are taking climate risk into consideration and exploring a change in mission. However, our philanthropy activities also allow us to take robust actions that are in-line with the urgency of the climate challenge.

Divestment is only one tool. Choosing to not invest in industries such as coal sends a strong message and can have impact but it’s only the starting point. More important is the decision to then allocate capital towards investing in climate solutions such as renewable energy infrastructure, clean technology, energy efficiency, and the like.