Dear Climate Science Skeptic


, ,

Over the last few decades there has been a growing division between us. We have each chosen our position and vigorously stuck to our set of facts, confused about how the other side can be so easily duped by misinformation. The internet gives us access to global news and volumes of research, yet we normally seek out stories that agree with what we already believe to be true, seldom crossing the aisle to see what the other side is saying. There is no dialogue or compromise, only an unwavering conviction that our side is right.

I had a chance to cross the aisle and hear what climate change skeptics and deniers are saying. Someone in my social network posted a story that detailed the plight of a climate research vessel, which was stalled by Arctic ice despite scientists forecasting the Northeast passage would be clear of ice thanks to increased summer ice melt. The brief story mentioned 2 other similarly stalled scientific expeditions, appearing to build a case against climate change “alarmists”. Reactions to the story highlighted where we stand as a country on climate science. Comments were evenly divided between those who used the piece as proof that climate change is a hoax and the others who fired back with scientific facts and data. Shouting at each other until the loudest one wins is not a solution to this problem. We must come to an agreement on what is impacting the planet we all call home so that we can work together and fix the problem.

Some of you are skeptical of climate science and believe that humans could not possibly change the earth’s atmosphere; that it is a hoax created by environmentalists, liberals, the government, or the United Nations. Others believe that changes in the sun’s distance, brightness, and/or temperature are responsible. Or that volcanoes are causing warming, or skewing the measurements, and that the earth is actually cooling.  Some of you in colder climates don’t see the harm in a warmer planet. Or counter that meteorologists can’t predict the weekend weather, how can they predict what will happen in 100 years? Or that today’s seasonal weather proves that climate is not changing. You might argue that the climate has always gone through cycles and we just need to ride it out. Or if it is changing that there is nothing we can do about it. Or if we tried to change it would destroy the economy.

Skepticism is not new to science. I would argue that skepticism is the foundation of science. It encourages critical thinking and engages us to look for explanations. Science is not a final answer, but a work in progress, with new discoveries forcing us to revise the way we view the world. Driving exploration is the scientific method, which is an ongoing process that requires ceaseless questioning, new data, and the requirement for a theory to be proven by multiple sources before being accepted. Science is not perfect, but the struggle to understand how things work has advanced our civilization, allowing us to share this conversation on whatever electronic device you are reading this on.

There is a big difference between skepticism and refusal to accept facts. There is a history of rejection of scientific findings: Galileo Galile and Nicolaus Copernicus met with violent objections to their theories about the universe, flat earthers and those who chose not to believe in plate tectonics are gaining traction, Charles Darwin’s On the Origin of Species and vaccination remain controversial… I could go on, but lets tackle some of your objections to climate science.

I will ask you to keep Occam’s razor in mind: among competing hypotheses, the one with the fewest assumptions should be selected, meaning that the least complicated theory is often the correct one.

To believe that climate change is a hoax would mean that for more than 50 years scientists around the world have conspired together, with the support of government institutions and non-profit organizations, to mislead the public. How would they benefit from perpetrating this gigantic fraud against the world? To what end would all of these agencies conspire together? And if this were the case, where is the evidence of this collusion?

There are some who believe China manufactured climate change to gain a competitive advantage over the U.S., which would mean that all of the other countries in the world who signed on to the Paris Accord are participating in the hoax. It would also mean that China, which only recently emerged as a global manufacturer, traveled back in time to the 1950s to seed concerns about climate change.

Thermometers don’t have a political or financial agenda. The ocean is warming, and there are several indicators that confirm this. The Great Barrier Reef in Australia, the largest coral reef in the world, has existed in some form for over 200,000 years; the current living reef is estimated to be 6,000 to 8,000 years old. Since 1979 coral reefs have been dying off around the world, with a global coral bleaching event in 2016. Scientists have linked the events to increased water temperature and acidification, caused by increased greenhouse gas (GHG) emissions. Portions of the Great Barrier Reef have already lost 83% of their coral and this ancient living organism may not survive.

Another sign of rising ocean temperatures is polar ice melt. The polar regions are heating up faster than any other place on the planet. The icecaps, which are being attacked from warmer air and warmer water, are flooding the oceans with freshwater ice. This is impacting water cycle patterns, changing the weather, and increasing ocean levels. What reason would scientists lie about warming oceans when we can see the ice melting? What  alternative cause might explain these linked events?

The average temperature of the earth has continued to rise since the Industrial Revolution. The planet’s average temperature has increased 1.4º Fahrenheit (0.8º Celsius) since 1880, with two-thirds of that rise occurring since 1975. Every year is hotter than the next, with 2016 the hottest year in recorded history. Temperatures from around the world are aggregated to reach this average, with some areas, including the polar regions, experiencing significantly larger increases. If man-made climate change is a hoax,  how might you explain measurable increases in temperature?

Dear climate skeptic, I am not trying to change your world view, but merely posing some questions to ask you to challenge your own. Ask yourself if you would rather spend your energy denying that we are impacting our planet or to do something. Maybe you have children. Maybe you have grandchildren. Maybe you would like for them to enjoy the world in which we live today. You can make that possible. The choice is yours.

091207usatoday global warming.91


Header Image Credit: NASA

The Battle for LGBTQ Equality: A Playbook for Climate Science Progress



June 28, 1969, was a milestone in LGBTQ history. The police had frequently raided the unlicensed bar, Stonewall Inn, but on this night the patrons resisted. The police were in the process of arresting cross-dressing men and a lesbian on trumped up charges when people poured into the streets in  protest. Years of unwarranted harassment had built up a tangible distrust of the police; the powder keg found its spark. At this time in New York gay and lesbian bars had to pay bribes to avoid being raided. Drag queens led the crowd in throwing loose change at the arresting officers as a form of payoff. The tossed pennies were replaced with empty cans, bottles, and bricks. The riot escalated and spilled into the pre-dawn streets of the West Village, lasting almost a week. The riot became a revolution that has continued to this day.

Why was that night different? This was not the first time that a LGBTQ bar had been raided, nor was it the first time that people fought back. What changed during that rebellion in 1969 was the realization that no one had to live with discrimination and that they could fight back as a community.

The crowd found its collective voice and raised it against pervasive social injustice. Homosexuality was considered a mental illness until 1973. Joseph McCarthy and Roy Cohn led the “lavender scare“, claiming gay men and lesbians were a risk to national security. Beauty queens and evangelicals campaigned through the 1970s to Save Our Children by spreading unfounded fears about child recruitment and abduction by homosexuals. Conservative politicians joined the religious right and used Biblical morality to wage a war on crimes against nature, trumpeting gay conversion therapy as a cure. Suicide attempts among gay teens have historically been 4 times greater than straight youth. Anyone who embraced their true identity could lose their job, home, and bring shame to their family.

Had the Stonewall Riots stayed focused on local police harassment it would have burned out in the narrow streets of the West Village. Instead various groups organized into a coalition to affect positive change. To commemorate the event they held the first gay pride parade. They gained traction by orchestrating boycotts and protests, using their purchasing dollars as leverage against businesses that discriminated against them. The fight moved from the streets to the court rooms, government offices, businesses and classrooms to build awareness. The AIDS epidemic devastated communities forced people to organize and fight for their lives against government negligence, public ignorance, and pharmaceutical foot-dragging. Being LGBTQ in the 1980s was a radical act.

American’s growing tolerance and acceptance was advanced through the media that connected people. Breakthrough comedies, movies, publically out celebrities, and the internet were used to raise awareness. Critical questions and scientific findings about gender and sexual fluidity refuted moral-based objections. As public opinion changed, so did politics. President Obama allowed long-standing discriminatory rules to expire like Don’t Ask, Don’t Tell, and the Supreme Court advanced marriage equality after decades of fighting for equal rights. Our understanding of LGBTQ issues has continued to evolve through education and exposure. Knowing LGBTQ people, even in the media, helps people see our similarities rather than our differences. This builds empathy.

In less than 50 years individuals who once had to live in the shadows have emerged into the most ethnically and religiously diverse community, with members in every country around the world. The struggle is not over, not everyone has equal footing or acceptance, it is still illegal to be LGBTQ in some countries, and bias crimes are on the rise. However, the incremental change in public opinion and legal precedents have built consensus that cannot be easily reversed.

Those of us concerned with fighting climate science deniers can take inspiration from this historic sea change. Many of the same obstacles faced by the LGBTQ community need to be overcome to make progress on global issues. The same conservatives who fought against equal rights and marriage equality are fighting climate science. They prefer the status quo and introduce misinformation to retain their view of the world.

Climate science should not be a partisan issue, but some people believe their opinion can refute basic facts. Greenhouse gas emissions, produced by humans, are warming the planet. This is disrupting the water cycle, increasing global temperatures, and melting glacial ice. Coastal areas are more prone to “sunny day” flooding, extreme temperatures and drought are becoming entrenched, forest fires are becoming more frequent. We don’t have time to waste debating whether this is real, or if it caused only by humans. We need that energy to work on mitigation and adaptation strategies.

We have the power to achieve this. Our tools are to keep fighting, educating, and building consensus. March for Science. Invite people into conversation, not battle. Bring everyone to the table. We must understand what climate change is and what we can do today to adapt to it. We can only achieve this together.

The truth always prevails.

Happy Pride.


Image Credit: The Advocate

A Smallholder Farmer’s Response to Climate Change


, , , , , ,

Allow me to introduce you to Solango Kakembo, a farmer from Kikandwa, a rural village about 80 kilometers west of the capital of Uganda. This enchanting gentleman built his small house overlooking the rolling African landscape at the edge of the fields that he and his family tend. His home sits near the center of the farming community, adjacent to the primary school built and operated by the Kikandwa Environmental Association (KEA). Kakembo volunteers his knowledge and experience on behalf of KEA, provides harvested seeds along with advice, and raises seedlings for the Half + Half Reforestation project at the core of KEA’s mission.

Kakembo is a vital resource to his community, but like most smallholder farmers he has not been able to share his expertise, especially as it relates to climate change, with a broader audience. He faces language and technology barriers. KEA has attracted international attention from nonprofits interested in preserving and sharing sustainable farming innovations, including A Growing Culture and The Pollination Project, but his valuable experience has not been fully documented. We traveled to Uganda to study the environmental benefits of sustainable farming and Kakembo shared the highlights of his knowledge. I want to tell you his story.

Agriculture accounts for more than 70% of employment in Uganda. Smallholder farmers provide most of the country’s food at a low cost; feeding the population reduces the risk for revolt. For many years Kakembo tried to compete with other commercial farmers, growing one or two crops at a time using chemical inputs to increase his yield, including fertilizers and pesticides. Over time he saw his yield decline, requiring additional and more expensive chemicals that were destroying organic nutrients in his soil in the same way that chemotherapy cannot target cancer cells over healthy cells. Kakembo developed respiratory problems which he attributed to the use of chemicals. To continue doing what he loved, being a farmer, he had to find a more sustainable approach.

As a child Kakembo had learned from his grandmother the art of seed preservation, land and water management, natural ways to deter pests, and which plants should be grown together. He decided to return to his grandparent’s village to start over and use her traditional methods. Kakembo continues to tailor her approach to respond to the impacts of climate change, notably the disruption in the water cycle. He focuses on preserving local varieties, especially those that perform well during drought, and uses mulching and animal manure to preserve ground moisture while cultivating the soil with organic material.

The village of his grandparents, Kikandwa, had also had a bad experience with commercial farming. Most of the region had been deforested using slash and burn to grow a single type of banana that was distilled into liquor. Farmers had not been growing crops for subsistence and the bananas were susceptible to banana wilt, compromising fields of trees. Food scarcity and theft between neighbors had been common.

Kakembo joined KEA, which was engaging local farmers to diversify their crops and use sustainable farming methods to improve the economy and quality of life for the community. They began with a reforestation project to create micro-environments that attracted biodiversity, reduced soil erosion from wind and water runoff, retained moisture in the soil, and provided shade from the equatorial sun. These areas were successfully established more than a decade ago along the borders between plots and on land that farmers had intentionally set aside. The benefits of reforestation were most evident during droughts, when farmers with forests performed better than those without. Interest in reforestation has grown as droughts have become more common and prolonged.

2017-06-09 - KakemboKakembo shared his concern that commercially available seeds provided inconsistent germination; an expensive gamble. Instead he uses his grandmother’s technique for seed preservation. The first step is to set aside some of the best crops from each harvest to continuously improve the quality of each subsequent harvest. The seeds must be consistent in size and shape. For instance he will take only kernels from the center of an ear of corn, using the smaller kernels for animal feed or corn flour. It takes 120 ears of corn to provide enough seed for 1 acre. The seeds are sun-dried or smoked, and can be preserved up to 6 months. He preserves heritage seeds, protecting the local varieties and improving biodiversity.

He experiments with different soils and growing conditions to test varieties, particularly for drought-resistance. He and his neighbors are dependent on rain for irrigation. Drawing water manually from the distant well is a labor intensive practice saved only for the worst droughts. The farms of Kikandwa are on slopes of varying grades, and the rainy season has been shorter and increasingly inconsistent over the past 5-10 years. Water must be preserved in the soil between rain events, which is done through a combination of mulching, terracing to slow runoff, and irrigation canals to capture water. The reforestation project has also slowed runoff, provided a means of water sequestration, and the trees “breathe” water back into the air through transpiration.

Smallholder farmers average around 2-5 acres of land to farm. Intercropping is possible since most of the work is done by hand. Kakembo highlighted the importance of raising varieties of the same crop, such as different types of beans, potatoes, yams and bananas, in the same season. The crops mature a different rates, have varying resources needs, variety protects against pestilence, and allows the farmer to have successful crops if one fails. Additionally, some crops partner well, for instance maize (corn) and beans; corn depletes the soil of nitrogen while beans replenish it.

Kakembo’s knowledge of traditional farming methods combined with agricultural innovation, known as agroecology, can help solve several sustainable issues facing the world. How to produce low-cost food without sacrificing the environment; large scale farms with significant chemical inputs are not sustainable and are polluting the soil and waterways. Smallholder farmers like those in Kikandwa are stepping up to the challenge, and adapting to climate change, every day. To continue doing the arduous work of farming and remain successful in providing up to 70% of the world’s produce, they need to be helped with sharing knowledge and resources.  Farmers will benefit by having a steady source of nourishment and entrepreneurial employment with purpose, and the community benefits with affordable and healthier produce.

Image: Kakembo’s seed bank, photo by Sean Meriwether


We Are the Paris Agreement


, ,

On June 1st, 2017, the United States officially withdrew from the historic Paris Agreement signed during President Obama’s administration in 2015. The agreement between all but two of the world’s nations (missing Syria, which is embroiled in a civil war and Nicaragua, which felt the agreement did not go far enough) was the culmination of more than 40 years of growing scientific consensus that human activity is increasing the earth’s average temperature. The agreement has two aspirational goals for the world: limit the increase of the earth’s average temperature by 2 degrees Celsius over pre-industrial levels and aid developing countries in responding to the consequences of climate change. The Paris Agreement works because every country agreed to collectively acknowledge and respond to a global problem in whatever capacity they could.

To achieve the first goal, each country determined their own targets for reducing greenhouse gas (GHG) emissions, which is the leading cause of climate change. This included the reduction levels and time frames, but did not require any plan of how this might be achieved. The reduction pledges, known as National Determined Contributions (NDCs), are 100% voluntary. As with most environmental treaties there are no punitive consequences if the proposed targets are not met, however there are negative consequences to the environment and the health of all of the earth’s inhabitants.

Many scientists worried that Obama’s pledge to a 26-28% reduction in GHG emissions was not aggressive enough, but his Clean Power Plan would have helped continue a downward trend. His strategy was immediately derailed by coal-producing states and may never be implemented, making it more challenging for the United States to live up to its original NDC pledge. There has been progress with energy efficiency, stricter regulations on car exhaust and mileage requirements, and notably the conversion of coal-fired power plants to natural gas, which have nominally reduced emissions. Yet all of these efforts are under attack by the recently elected president who embraces the fossil fuel industry and steadfastly holds the belief that environmental regulations kill jobs.

2017-06-01 - Image
Source: World Resources Institute

The second goal is for the developed countries to voluntarily contribute to a $100 billion per year international fund, the proceeds of which would be used by developing countries to adapt to the impacts of climate change: rising sea levels, a disruption in the water cycle, rising temperatures and heat-related deaths, increase in communicable diseases, decrease in agricultural output, and increase in more extreme weather events, among others. The money for this fund represents a negligible fraction of the developed countries’ Gross Domestic Product, and would be significantly less expensive or disruptive than responding to a global climate refugee crisis. The Syrian refugee crisis nearly unraveled European unity; this massive migration, one of the largest in history, is only a preview of what is to come.

The decision of the current President of the United States to withdraw from the Paris Agreement is problematic on many levels and his statement contained misleading data and bold-faced lies. The country has historically been the largest contributor to GHG emissions, the pledges for both reduction targets and monetary contribution are voluntary, and participating in this good will international agreement neither kills jobs nor puts the United States at a disadvantage. What value is there in renegotiating a nonbinding agreement? Whatever your opinion of his policies, his decision serves only to underscore the isolationist and protectionist stance of his increasingly controversial and scandal-prone administration.

The world’s response was immediate. World leaders reacted strongly, committing to the global challenge with or without the President of the United States. Now that the United States has abandoned the rest of the world, China, under President Xi Jinping, is taking the lead and the competitive business advantage, particularly in emerging industries and renewable energy that are creating jobs. In the US states and cities are going it alone. New York, California and Washington, along with hundreds of mayors and business leaders, not to mention the majority of the population, will proceed with GHG reductions plans already underway proving that no single person can stand in the way of common sense.

We can debate this shortsighted decision with confused outrage or we can take action. The first thing Americans can do is sweep climate change deniers out of office in special and the midterm elections. We should contact our government representatives from the local up to the federal level and let our voices be heard. We can take to the streets and march, for human rights, science, and equality. We can take a bolder step and run for public office. We can also use the power of our personal choices and our purchasing dollars and achieve our environmental goals.

Our decisions in what we eat, how we live, how we travel and what we buy are made daily. Minor changes in our habits can have dramatic impact on protecting the environment. Simple choices such as eating less red meat, eating locally produced food, reducing our energy usage, using mass transit when possible, and improving energy efficiency in our homes and offices can help save this planet. If you consider our actions like compound interest, with each person contributing a little every day, crowdowdsourcing a solution gives us the power to change the world.  Do your part today to save tomorrow.


Image credit: Earth Times

Takeaways from the US SIF Conference


, , , , , ,

US SIF: The Forum for Sustainable and Responsible Investment is part of a global network advancing sustainable, responsible, and impact investing across all asset classes through a combination of collaboration, education and public policy work. The US-based organization held their annual conference in Chicago in May, 2017. This year’s theme was “A New Climate for Investing in Impact”, which offered a platform to raise concerns and responses to the radical shift on the political landscape.

The three day event covered the basics of sustainable investing, tried to tease out the varying definitions linked to the industry, and detailed many of the nuances of this incredibly broad list of investment strategies. As will be discussed below, the industry is built on a forest of overlapping terms, which can be opaque even to the initiated. For the purposes of clarity this post will defer to social responsible investing (SRI) as a comprehensive term that covers sustainable, responsible and impact investing across all asset classes, and environmental, social and governance (ESG) metrics as an investment criteria used to screen corporations.

The name of the 45th US President appeared like a specter throughout the conference, namely his administration’s buckshot approach to derailing more than 40 years of environmental and scientific advances, but many attendees maintained a pragmatic optimism. His administration may disempower the environmental regulations entered into force under Nixon in 1972, continue removing scientific data from government-owned websites, and re-crown the fossil fuel industry as the kings of energy, but the general feeling in the room of over 400 SRI/ESG advisors and specialists was that “the train has left the station” with regard to environmental issues, renewable energy, and cleantech. Consumers are better informed and vote with their dollars. If fact, having a common enemy in the current administration has unified this loose collection of investors, advisors, scientists and concerned individuals into a stronger opposition; passionate people who are armed with the truth and facts.

The conference focused on the market forces already at work, in which SRI/ESG investment strategies have gained momentum beyond a niche investment space. Climate change is no longer a theory, it is happening in real time with extreme weather events,  melting polar ice and disappearing islands. Consumers, particularly Millennials, are investing their money with companies that align with their environmental concerns. Several speakers shared data about how the coal industry is tapering off due to the availability of cheap natural gas more than environmental concerns, and it was only a matter of time before the fossil fuel industry followed (albeit more slowly). Representatives from the Union of Concerned Scientists are on the front lines protecting data sets, and Kathy Mulvey’s report was shared on how the oil and gas industry is recently promoting  an environmental message but continuing business as usual. We are collectively pushing forward despite the current administration’s haphazard push in the opposite direction.

However, one alarm raised during the conference was the Business Roundtable’s proposal to modify Rule 14a-8 of the Securities Exchange Act, which governs shareholder proposals. Currently owners of at least $2,000 worth of a company stock, which has been held for more than 1 year, can submit a proposal to be voted on by shareholders. This proposal must win an escalating percentage of votes over years before it will be officially considered. To modernize the process the Roundtable has proposed that only shareholders with 1% of company stock held over 3 years should be allowed to make proposals; this translates into billions of dollars in shares for large-cap companies. This rule would also disallow asset managers who hold stock on behalf of their clients from the process, not that they actively make proposals to date. This minor change would effectively eliminate everyone from the process. This is a concern because shareholder proposals have been used over decades as a way to gather support for social and environmental initiatives, such as equal pay across genders, LGTBQ rights, and better resource management. Without this tool, the majority of stockholders will be voiceless in the boardroom.

Additional opportunities were raised throughout the conference to help take this investment strategy to the next level.

  1. Despite a growing body of evidence that companies with strong ESG metrics are more innovative and more resilient than their lower-scoring ESG peers, there is still a misperception that investing in social good requires a tradeoff in yield. To quote US SIF Director of Research, Meg Voorhes, “Values translates in value.”
  2. Advisors who are on the front lines with clients are often unfamiliar or unaware of the advantages for SRI/ESG investment strategies, even when their clients are asking for them. Lily Trager from Morgan Stanley outlined plans to educate their 16,000 advisors.
  3. SRI/ESG investing has a significant marking problem; members within this community have difficulty parsing the terminology. To paraphrase the CEO of US SIF, Lisa Woll, the community took the most complex language of the financial sector and appended it with terminology that only makes sense to themselves. They cannot engage investors until investment advisors can speak in clear terms.
  4. In the coming decades, there will be a wealth transfer from Baby Boomers to Millennials estimated to be $30 trillion. This generation is more interested in putting their money to work while earning a profit, or “yield plus”. This enormous opportunity is driving the conversation around SRI/ESG investing.

Lastly, the keynote speaker, Bryan Stevenson, raised social justice issues not covered elsewhere during the conference. He has been a public advocate for those who have been victimized by the American criminal justice system, reminding us that the system “treats you better if you’re rich and guilty than if you’re poor and innocent.” His impassioned speech was the highlight of the event, and his real-life experience was documented in his book Just Mercy: A Story of Justice and Redemption.

Millennials are Investing with Impact


, , , ,

Social Responsible Investing (SRI)  is an investment discipline that considers environmental, social, and corporate governance (ESG) criteria alongside other industry metrics to generate long-term results with positive social impact. ESG ratings are published by several companies, with MSCI and Sustainalytics two of the largest US-based providers. There has been a long-held belief that ESG screening  requires a tradeoff with lower (or negative) financial returns. SRI investors have shown that  companies with higher ESG scores use their resources more efficiently, have less exposure to litigation, better standing in public opinion, and happier and more productive employees. These elements benefit long-term investment and these companies have steadily met or exceeded their lower-scoring peers.

There are two basic approaches to SRI:

Negative screening: This strategy began with restricting investment in companies that earn revenue on products such as firearms, alcohol, tobacco, or adult products (aka “sin” stocks), and have recently expanded to include oil and gas companies. Negative screening is the most commonly used criteria but can have mixed results against benchmarks. ESG scores capture some elements such as diversity on the board of directors and within the company’s senior management, as well as the social and environmental impacts of the business, however they do not capture management decisions, product development, or factor in offsite manufacturing (particularly for “green” technology companies that have other companies make their products in other countries).

Positive screening: Investors wanting to invest in companies that align with specific goals or values, such as renewable energy, clean-tech, affordable housing, or energy efficiency, may use the more active approach of positive screening. They may look at a broader range of factors that may not be easily accessible, but this extra effort can have a higher rate of return against benchmarks. Positive screening may also include direct investment in projects with private equity, such as building a community solar for an underserved population.

SRI and impact investing have deep roots, but this investment strategy has only recently moved beyond a niche space into the broader market. According to US SIF Foundation’s 2016 Report on Sustainable and Responsible Investing Trends in the United States, more than 1 out of 5 dollars under professional management in the US is invested according to SRI strategies; that is $8.72 trillion and growing. “I think we’re at the end of the beginning,” said John Streur, president and chief executive of Calvert Investments, Inc., who was quoted in a Wall Street Journal article about the recent enchantment with this previously overlooked strategy. 2015 saw the development of SRI and ESG products at some of the largest banks, asset managers, and private equity firms, notably Black Rock, JPMorgan and Goldman Sachs. They are not merely jumping onto the “green” gold rush, they are responding to consumer demand for investments that not only deliver returns but do so with social impact.

Many institutional investors, including pensions, have historically leveraged SRI strategies to fulfill fiduciary duties or for risk management, but a growing number of private investors want their money to grow by investing in companies or projects that take ESG measurements seriously. A growing demand is coming from Millennials (people born between the early 1980s and mid-1990s). “It’s a huge nod to the times,” Mr. Katchen, the CEO of Wealthsimple Inc, said in the Globe and Mail. “Young professionals not only want to make money on their money but have their investments aligned with their values.” His company added SRI exchange-traded funds in 2016 to cater to client requests, about 85 percent of whom are under the age of 45.

This large and diverse group of young adults is a perfect audience for SRI. This generation, who came of age during the fallout and austerity of the Great Recession, is forgoing the status cars, homes and high-pressure jobs of their Baby Boomer parents in exchange for experiences. They are pioneering the technology-driven version of the shared economy with car sharing, apartment living, and the gig economy. They are taking the same approach with their portfolios favoring companies that share their values. Asset managers should be looking to include products that appeal to this demographic. A 2016 report released by Accenture noted that Millennials make up close to half of the workforce in North America and are expected to inherit more than  $30 trillion in the coming decades. That is a lot of capital to be invested according to their terms. Public companies should also take note that their ESG scores are going to be increasingly important to shareholders.

Photo Credit: David L. Ryan, The Boston Globe

Resource Management in 1984: The Continuous War


, , , , ,

It should come as no surprise that George Orwell’s dystopian novel, 1984, has returned to best seller’s lists. We often turn to literature to help make sense of reality, which can be incomprehensible and a lot less linear. It is easy to draw comparisons between Orwell’s alternate reality and a political administration that intentionally lies to the public, attempts to disempower and circumvent the free press, and manipulates previously published statements to fit the current version of their story; all of these disturbing points are raised in the novel. The government can exert undue influence over the population by steering public opinion, history, language and their control of the media can be used as a weapon to destroy anyone who resists.

One perspective that has not been discussed in relation to the current U.S. political administration is the story’s depiction of resource management. 1984 takes place in a world that is continuously at war. The protagonist, Winston Smith, learns that Oceania has been at war or in alliance with both Eurasia and Eastasia for 25 years, frequently switching sides. Which region is the enemy is not important; being at war drives production. Winston learns from Goldstein’s Manifesto that:

“The primary aim of modern warfare (in accordance with the principles of doublethink, this aim is simultaneously recognized and not recognized by the directing brains of the Inner Party) is to use up the products of the machine without raising the general standard of living.”

This method of production for the machine of war may have been inspired by post-WWII reality. As devastating as the war was on the world, particularly Europe, for the United States it put people back to work and closed the book on the Great Depression. The U.S. was one of the only manufacturing powers left standing and achieved unprecedented growth. Once the war ended maintaining that momentum became the sole answer to avoiding another depression.

In Four Arguments for the Elimination of Television, Jerry Mander discusses how the government and industry leaders joined together to develop a new economy based on manufactured consumer demand, versus actual need, to keep production lines rolling. This was achieved by marketing a new lifestyle to returning GIs; they should have their own cars, homes and appliances. They used the new medium of television as a means to sell this product-based version of the American Dream. The suburbs were created, the car culture became entrenched, and consumer competition became a norm. The economy boomed. The quality of life—as measured by how much people could buy—grew, but so did dissatisfaction and discontentment. We now live in a society that feeds itself pain killers and alcohol to numb the hole created by what we lack.

Orwell’s economy of manufactured products specifically to be destroyed in the name of war and Mander’s economy based on manufactured desire both present an unsustainable use of resources at the expense of humanity.

This begs the question; with the current administration pushing for an increase in manufacturing, and more alarmingly a substantial increase in the extraction and distribution of fossil fuels, what is their plan for using those resources? Let’s put aside the reality that the world has been decreasing its dependence on fossil fuels, particularly coal, because of increased efficiency and the impact on the environment, and that most manufacturing jobs were lost to offshoring and automation, and ask if they are able to achieve their goal of increased production how will output be purposed?

The current U.S. administration has already begun the process by green-lighting two deals that had been derailed by the Obama administration, which had cited environmental concerns. The Dakota Access Pipeline and the Keystone XL Pipeline, when operational, will not bring construction jobs (both pipelines are nearly complete), but will deliver up to 1.4 million barrels of crude oil every day from fracked and tar sands fields in the U.S. and Canada. Crude oil will flood a market that is already saturated, potentially impacting global oil prices. Where is this oil expected to go? Similarly, increased manufacturing in the U.S. creates more goods in a world which already has too many things at a cost that will be uncompetitive on the global market. Who will purchase these goods?

To build and maintain the manufacturing future promised in the campaign, we may need to purchase more stuff that we don’t need and can’t afford or move into a perpetual state of war to create an endless demand for production. The head of this administration has already started a war of words with other heads of state, notably with Mexico and the members of NATO; could this lead the U.S. into confrontation to fulfill his mandate to bring home American jobs?

Rather than paint another gloomy scenario, there is an alternative which would achieve the administration’s job creation goal without destroying resources or creating more consumer debt. If they continue to invest in green and renewable industries, which are in high demand globally, manufacturing and construction jobs would be created, the economy would improve with this improved commercial base, and the U.S. would have the side benefits of reducing its reliance on imported fossil fuels while cutting carbon emissions. Although they are unlikely to pursue this course, public pressure on the administration could force them to embrace the future instead of the past. Let’s stop focusing on what is going wrong and push for an more sustainable alternative.

Portfolio Diversification Across Asset Classes


, ,

Diversification of portfolios with U.S. equity holdings can come in many forms, but one traditional method is to include alternative assets classes. To achieve diversification the portfolio should include assets that are not in step with (correlated to) the U.S. equities markets, otherwise both assets will rise and fall in tandem and offer no protection against market swings or inflationary environments. Historically this means investing in real estate, foreign equity and debt, and commodities. All three of these alternative asset classes are more accessible at an affordable point of entry via ETFs, ETNs, REITs and mutual funds.

Luis Garcia-Feijoo, Gerald R. Jensen, and Robert R. Johnson reported on a regressive study covering a 41-year period (1970-2010) in “The Effectiveness of Asset Classes in Hedging Risk“. They focused on the correlations between U.S. equities and other asset classes in order to outline the most effective strategies for diversification during normal market fluctuations and extreme market conditions.

Real Estate: Traditional advice has encouraged investment in real estate as a long-term strategy against inflation, not a short-term strategy for return enhancement. However, the findings indicate that there is a very strong correlation to the U.S. equity market, meaning that REITs offered very limited diversification in an equity portfolio. This might seem evident considering how heavily integrated the real estate market is in the general market, but it did not stop many from investing heavily in the real estate market while simultaneously investing in industry-related products such as mortgage-backed securities, which led to an inflated market and the financial crisis of 2007/08.

Foreign Equities: The study also found a growing correlation between foreign equities, particularly in the developed market, and U.S. equities. Globalization has created many trade dependencies and an integrated supply chain, uniting many industries and sectors. The one sector that varied was emerging markets, which were not closely correlated with U.S. equities, but also varied from each other. A careful examination should be conducted before investing in this market for diversification.

Commodities: A majority of commodities exhibited a trivial correlation to U.S. equities, which performed consistently well through various market conditions with very little change in value. This was especially true of gold as an asset class, which appeared to be an effective hedge during market turmoil. Energy also performed well during inflationary periods. One outlier was metals, which are used in commercial production and are more closely linked to the commercial market and U.S. equities.

Bonds: Bonds offer a predictable, if limited, return, and are among the safest investments. This lack of volatility not only allowed them to perform well through normal market conditions, but they performed better during extreme market movements because of their lack of correlation, particularly emerging markets, offering the best diversification when most needed by investors.

A balanced portfolio is likely to contain a percentage of all of the above assets for diversification, which will not only protect the portfolio against extreme movements, but improve the overall return over time. However, recently the correlation of other commodities and alternative assets has narrowed with some exceptions in micro-financing in third world countries, which  has remained uncorrelated to U.S. equities.

Agroecology: A Multifacted Solution


, , ,

According to the Food and Agriculture Organization (FAO), smallholder farms provide up to 80 percent of the food supply in Asia and sub-Saharan Africa. Although farmers work small plots of land (average size is 2 hectares), they produce a variety of crops with high yields and very few inputs such as manufactured fertilizer. These cost savings are passed on to the consumer in affordable sustenance for the rural and urban poor. These individually-held farms provide economic opportunities and are the primary source of income for women. This helps reduce migration to the city for work; when farmers leave they cease to be producers and become dependent consumers living in informal settlements.

Lack of food security is an agent for civil unrest, particularly in countries where the government is the primary supplier of food. A global shortage caused a spike in wheat prices that sparked protests across the Middle East; the Arab Spring was a revolution of the hungry. Feeding the population prevents internal conflicts and social uprising against the government. Smallholder farms fill the gap in imported foodstuffs by providing locally grown produce and livestock at affordable prices. However, smallholder farms are being attacked from many sides, including encroachment of industrialized farms, changes in rainfall patterns, droughts and floods, rising temperatures, and urbanization.

Maintaining food sovereignty of smallholder farms solves many economic, social and environmental issues, particularly when the farms are managed using sustainable methods. Agroecology is a hybrid approach that blends rustic methods of community-based farming with modern agricultural methods of production. The rural farms provide food for the household as well as cash crops, including fruit, coffee and tubers. This method addresses many of the Sustainable Development Goals, including: poverty eradication, zero hunger, good health and well-being, promotion of gender equality, clean water and sanitation, decent work and economic growth, life on land, and environmental sustainability. 

The farming region of Kikandwa, Uganda, is an example of the successful implementation of agroecology. John Kaganaga, a local resident, returned to his home after many years away and discovered that deforestation, caused by clear-cutting for livestock and charcoal production, was ruining the village. The individually-held farms were not productive and there was theft between neighbors who were unable to adequately feed themselves. He formed the Kikandwa Environmental Association to address natural resource issues and begin a reforestation project. He worked with the community to define appropriate solutions and introduced agroecology to the region. He obtained grant money from the government and NGOs to build a computer lab and research center. Over the last decade, Mr. Kaganaga has helped turn the tide and empowered rural farmers with information and training. Local farmers now produce enough crops to feed their households as well as grow cash crops including bananas, passion fruit and paw paws that are exported to the capital city, Kampala.

A unique characteristic of Uganda is that smallholder farms are still the predominant method of food production. Their sustainable farming methods need to be documented as a more economically, environmentally and socially sustainable approach versus industrialized farming before large scale farms can gain a foothold in the country.

One of the non-profits that is working with Mr. Kaganaga to document these methods, and expand upon them, is A Growing Culture (AGC), which advances the culture of farmer autonomy and agroecological innovation through outreach, advocacy, and information exchange. They document sustainable farming practices and share methodologies in workshops to guide rural farmers into sustainable practices that are localized for the environment and community. Their sustainable farming methods also provide a response to climate change by creating rich carbon sinks, raising resilient crops, better water management, and protecting biodiversity. Some of these methodologies are: intercropping, crop rotation, soil enrichment, water conservation, natural fertilizers, and effective non-chemical pest controls. For example, AGC held a workshop on beekeeping, which a resilient source of income for farmers.

Returning to proven methods of sustainable farming, composting, and natural pest control, not only provides economic opportunities for rural farmers, particularly women, it also reduces the use of chemicals such as fertilizers and pesticides while improving soil quality and crop yield. These farmers are also protecting the rich biodiversity of their region by working with local varieties; this creates a more resilient approach to farming.

Image Credit: Pesticide Action Network

America Can Have Energy Independence with Renewable Sources


, , ,

President Richard Nixon fumbled the first energy crisis in 1973. The oil-producing countries that formed OPEC wanted to control the price of oil and cut off supply to create scarcity with the hope that this would increase the price per barrel. America had no concerns about oil supply prior to the embargo—resources appeared to be limitless—but being cut off from the lifeblood that was at the very center of the modern economy forced the country to face its vulnerability.

In a normal market when demand for a resource is consistent—oil has a very low price elasticity—prices rise when the resource becomes limited. Energy prices at this time were fixed by the government and reviewed infrequently. The combination of artificially low prices and manufactured scarcity set the stage for national chaos.  Gasoline was rationed, people waited in gas lines for hours, fistfights at gas stations were frequent and theories of peak oil proliferated. Americans have rarely faced scarcity and this event created a vivid memory nearly as strong as the Great Depression. The specter of energy shortage haunted every presidential administration after Nixon, and few presidents have made a concerted effort to reduce dependence on fossil fuels. Jimmy Carter failed to mandate a 20% solar power contribution to the energy mix. One might argue that the technology was neither efficient nor affordable enough to achieve that lofty goal but the country may have exceeded it in the 4 decades that followed. Instead the country became more dependent on fossil fuels and even went to war in the Middle East to protect access to oil. The “crisis” was over when Ronald Reagan was elected. On his first day in office he removed Carter’s solar panels from the White House in a symbolic rejection of renewable energy.

The oil embargo left a lasting impression, but the wrong one. America had not faced an energy shortage. In fact, there are more known oil reserves than can be used without destroying the biosphere. Economist Vaclav Smil confirmed that, “our reliance on coal and hydrocarbons and the rise of nonfossil energy will not take place because of physical exhaustion of accessible fossil fuels but… because of the mounting cost of their extraction and, even more importantly, because of environmental consequences of their combustion.”

The protesters at Standing Rock were fighting the pipeline to protect their ecosystem, but they should look north at the source of crude oil for a graver concern. The Bakken Formation straddles North Dakota and Canada and oil deep in the bedrock can only be extracted with the use of horizontal drilling and hydraulic fracturing (fracking). This extraction will continue whether or not the pipeline is completed.

Crude oil from the U.S. portion of the Bakken Formation is being extracted in one of the most environmentally insensitive ways. Fracking involves the high-pressure injection of 2-8 million gallons of water mixed with chemicals up to 8,000 feet deep into the earth’s crust. This pushes the oil out of the bedrock. The wastewater is left in the ground, below the aquifer, leaving open the probability of water table contamination. The waste water disposal wells have been linked to an increase in earthquakes, particularly in Oklahoma which had 907 magnitude 3 or higher earthquakes in 2015. The new oil fields have created numerous logistical problems including how to get the oil to the market. Several transnational and interstate pipeline projects have been developed to speed crude oil to the market and feed the world’s insatiable appetite for cheap fuel. Environmental objections have blocked some of the projects, most recently the Keystone XL pipeline, because a spill would be catastrophic, especially if dispersed into a body of water. Crude oil is toxic and nearly impossible to remove without harsh chemicals that amplify toxicity to the ecosystem. Oil spills from the Exxon Valdez and Deepwater Horizon have caused significant damage and destroyed the aquaculture, animal life, and livelihoods of the people in the impacted areas.

Even including recent advances in domestic production the U.S still imports 9.4 million barrels of oil per day, with 31% of it coming from OPEC. The American oil and gas industry, with the full support of the government, is encouraging dependence on fossil fuels for their financial gain at the expense of water resources and regional ecosystems, and the much larger global risk of climate change.

The Environmental Protection Agency calculated that fossil fuel consumption is the primary cause of GHG emissions in the U.S. Scientific consensus has shown the linkage between GHG emissions and the increase in the earth’s average temperature, which is causing climate change. To counter this effect the world’s countries, in partnership with the United Nations, agreed to GHG emissions reductions in the Paris Agreement. The US voluntarily set an emissions reduction target of 26-28% by 2025, a sensible target that they are unlikely to hit.

There are over 2.5 million miles of pipelines in the U.S. and the DAPL will transport 520,000 barrels of oil per day for approximately 40 years, or 7.5 billion barrels of oil. According to the EPA there are 0.43 metric tons CO2 per barrel of crude oil. Oil from this pipeline would add approximately 3.2 billion tons of CO2 to the atmosphere, which does not include emissions generated by extraction and refining. Carbon emissions impact the atmosphere for hundreds, if not thousands of years.

The definition of sustainable development, which was established in Our Common Future, is that “sustainable development is development that meets the needs of the present without compromising the ability of future generations to meet their own needs.” Rather than focus our attention on the real crisis, reducing the use of fossil fuels and exploring less environmentally impactful fuel alternatives, we are continuing our dependence and paying huge environmental and social consequences. In this one case the oil extraction process is destroying millions of gallons of water, local aquifers, risking environmental damage from spills, creating the potential for earthquakes, threatening the health and livelihood of the local population, the Missouri River, and other areas along the four states that the pipeline traverses, and will add GHG emissions to the atmosphere for the next 40 years, increasing climate change.

Although this oil will still find a way to get from the production fields in North Dakota to refineries in the south of the US, some of which will be exported to the highest bidder—not ensuring energy independence, only the largest profit for oil and gas companies. The pipeline only expedites this process. It can be argued that leaving it in the ground should be the default option because of the environmental consequences. Instead the Sioux are facing another round of brutality at the hands of the U.S. government, who are protecting the rights of an industry, not the people. It is socially ethical to continue exploring for new oil and gas reserves, and exploiting existing ones, at significant financial and environmental costs instead of focusing our resources on an alternative energy strategy before climate change is irreversible?

Image Credit: efergy