There's a financial case for divesting from funds with holdings in the fossil fuel industry, according to an advisor and author on socially responsible investing, but most activists don't make the financial case.
"They're making a moral case, they're making an environmental case," Tom Nowak of Quantum Financial said at an appearance at Green Fest in Chicago Friday. "What do people respond to when it comes to money? Give me the financial case."
The financial case, according to Nowak, derives from the increasing likelihood of a price on carbon.
The valuation of index funds depends on the assumption that all of the fuel represented by their investment in the fossil-fuel industry—about 10 percent of their holdings—will be burned, said Nowak, the author of "Low Fee Socially Responsible Investing: Investing In Your Worldview On Your Terms." But less of that fuel may be burned if the U.S. and the United Nations impose a price on carbon.
"The risk of not divesting from fossil fuels seems to have a large price associated with it."
I asked Nowak if he could quantify that price.
"It's very hard to quantify, he said, "but I see it as a very strong momentum."
The investors who pledged to divest from fossil fuels in the wake of New York's Climate March in September, including the Rockefeller Brothers Fund, are indicators of that momentum, he said, and so a potential indicator of things to come.
"The $50 billion that pledged to divest was't dumb money," he said. "Presumably if 10 percent of those are in fossil fuels, that's $5 billion."
Nowak was one of dozens of speakers addressing visitors to Green Festival, a "sustainability and green living event," this weekend at Chicago's Navy Pier.
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