Divesting and Re-investing into a Greener Future for Canada
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Date
2016-07-28
Authors
Hunt, Chelsie
Advisor
Weber, Olaf
Journal Title
Journal ISSN
Volume Title
Publisher
University of Waterloo
Abstract
Whether Canada chooses to adhere to its responsibilities to meet its climate change targets or
not, investors in Canada have a lot to be concerned about. The imminent threat of human induced
climate change will have the global community reacting in ways that will affect Canada and their
investors. This thesis explored the Canadian equity market through the lens of an investor who is
interested in investing with particular strategies that address climate change with respect to
carbon emissions. Both modern portfolio theory and behavioral finance theory were explored and
demonstrated that both investor types should be concerned about the climate change related risks;
that the two theories contending paradigms are bridged on the topic of socially responsible
investing concerning carbon related risks in respect to climate change. The two techniques
utilized for portfolio construction that addressed carbon related risk and supported moral and
ethical ideologies were: tiered divestment of fossil fuel related companies and utilizing carbon
footprinting metrics to create best in-class portfolios. Throughout the period of January 2011 to
August 2015 the resulting portfolios of the two strategies outperformed relative to their associated
benchmark; that is, offering a superior risk/return while mitigating the risk associated to carbon
emissions. These results contribute the body of the literature that analyzes the link between
socially responsible investing and financial performance.
Description
Keywords
disinvestment, investments, moral and ethical aspects, Canada