Foundation News

Peabody Woes and Mid-American’s Big Bet on Wind Highlight Risk for Fossil Fuel Investors

By Peter Martin, Executive Director, Sierra Club Foundation

Last week, we saw two dramatic developments in the unstoppable shift from dirty fuels to clean energy, both of which are clear illustrations of the rapid changes occurring in the energy investment environment.

On Tuesday, Peabody Coal, former giant in the energy industry, which had been teetering for months, finally fell. For market watchers and investors around the globe, Peabody’s bankruptcy was a decisive moment in the decline of an industry that once seemed invincible. The New York Times pegged it: “Wall Street’s retreat from King Coal.” 

The very next day, in a major boost to America’s burgeoning clean energy economy, Warren Buffet’s MidAmerican Energy announced that it would add 2,000 MW of new wind energy installations in Iowa, enough to power at least 200,000 homes, in addition to the 4,000 MW it has already built. If approved, this $3.6 billion investment would be installed by 2020 and would allow families to run their homes and businesses on 85 percent clean energy, without a rate increase for customers. This is just the beginning, too. In fact, MidAmerican CEO’s dream is ultimately to deliver 100 percent renewable energy for customers.

As an investor and an early signatory of Divest-Invest – a network of foundations that have committed to divesting from fossil fuels and re-investing in climate solutions – Sierra Club Foundation made sure that none of its funds were invested directly or indirectly in companies listed on the Carbon Tracker 200, and instead look for ways to invest responsibly in clean energy. According to the Carbon Tracker 200, Peabody was the tenth largest fossil fuel company as measured by total CO2 reserves. Not investing in dirty fuels aligns with Sierra Club Foundation's mission, but it also had the financial benefit of insulating us from the crushing losses that have hurt coal investors. In 2011, Peabody stock was worth over $1,000 a share; now it’s worth less than a buck. And it’s not just Peabody. Market Vectors Coal ETF – a basket of coal company stocks – has lost 85 percent of its value over the same time period.

At present, virtually all our operating and endowment funds are fossil fuel free and we’ve ramped up our clean energy investing carefully. About ten percent of our funds are invested in clean energy funds that have a consistent and strong track record and we have a goal of getting to 20 percent in the near term. Just as important, our strong investment results have allowed us to return our earnings back to the grassroots campaigns that are fighting dirty fuels at every turn and creating a just and inclusive clean energy economy.

The forces that worked against coal also work on oil and gas. Communities everywhere are standing up to proposed dirty fuel projects that would jeopardize the health of the community – even while the cost of clean energy just keeps becoming more affordable, making it easier for utilities to make the switch to clean energy. And once the switch is made, and people see the economic and health benefits of clean energy, one thing is for certain: we're never going back.

During this inevitable transition from dirty energy to clean, we may well have temporary setbacks along the way. Many investors will make a lot of money; others will lose. As a leader of the Sierra Club Foundation, I’m happy to be investing in clean energy. It’s the right thing to do for the planet and its people. As an investor, we are betting on clean energy – and if last week’s events provide insight for how this will play out, I like our chances.

 

Category: News and Updates