As of Feb. 1, 2016, the McKnight Foundation’s $188 million bond portfolio is coal-free. It’s a move we made to further align our investments with our grantmaking goals of building a low-carbon economy. And as this economy-wide transformation advances, coal debt is likely to become increasingly unattractive to long-term investors.
The process was relatively easy and the costs low. First, we identified any dedicated coal companies and mining companies that owned underground coal reserves. This led to selling only eight bonds valued at $1.6 million in the 1,500-bond portfolio. A relatively small number when compared to the entire fixed income portfolio.
Screening out coal companies
Then, our manager, Mellon Capital Management, helped us build our own coal “scrubber” to prevent future purchases from companies with underground coal reserves — known as a coal “screen” in investing circles. Our portfolio still includes companies that use coal to generate electricity as forward-looking utilities are already making the shift from coal to increasingly cost competitive renewable energy options.
The McKnight Foundation’s fixed income portfolio joins its $100 million investment in the Carbon Efficiency Strategy that also excludes dedicated coal companies. In other words, 15% of our endowment has been scrubbed for coal.
This move is part of The McKnight Foundation’s ongoing efforts to mobilize all of our resources, including its endowment, to help build and strengthen socially, economically and environmentally sustainable communities. Since 1992, we’ve made $140 million in grants to organizations advancing a low-carbon future. And since 2013, we’ve been taking action to decarbonize our portfolio, reinvest in low-carbon solutions, and help markets evolve. This includes a commitment to move $200 million into investments with higher impact.
Supporting communities in transition
Just as it’s essential to invest in a cleaner energy future, it’s essential to support coal dependent-communities seeking to reinvent their economies. And it turns out people from coal mining country and communities that staff coal-fired power plants are seizing the chance to start new and sustainable businesses and create new jobs.
For this reason, The McKnight Foundation recently completed a $1 million investment in a small nonprofit bank in coal country. The Natural Capital Investment Fund lends money from southeastern Ohio throughout the Appalachian region. It finances small businesses that are creating jobs, conserving natural resources, and growing community wealth. The varied recipients include an expanding large animal veterinarian clinic, a historic downtown in need of renovation, an eco-tourism venture, and loans to 88 West Virginia companies for cutting energy consumption and reducing costs. The bank also provides entrepreneurs and companies with valuable technical assistance to grow their enterprises.
Carbon-conscious investors often get excited by emerging renewable energy and efficiency technologies, and we have good reason to be. At the same time, for this transformation to be truly successful, we must help all communities and sectors make this transition.