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Investment Approach to Core Issues

Climate Change

We believe there is an urgent imperative to reduce human-generated carbon dioxide emissions. Climate change can be addressed by phasing out our consumption of fossil fuels and transitioning to renewable energy sources; as investors, we have a key role to play in this transition.

Prentiss Smith & Company takes a divestment approach to companies involved in the exploration, extraction, refinement, production or distribution of fossil fuels such as coal, oil and gas. This includes companies involved with hydraulic fracturing, also known as “fracking.” But while our standards include such rigorous benchmarks as the Carbon Disclosure Project and Carbon Underground 200, we further screen out companies who depend on the fossil fuel industry for a majority of their profits. For instance, we would not invest in an equipment manufacturer who largely services oil rigs or gas pipeline installers. We believe that when enough investors deprive the fossil fuel industry of the capital needed to continue business as usual, we can collectively deliver a competitive advantage to the renewable energy industry and advance the fight against climate change.

We also seek out investments in clean energy companies. While we believe the long-term financial outlook for fossil fuel companies is poor, many companies that deliver solar, wind and other renewable sources of energy have strong long-term growth potential. We strive to include the most promising of these companies in our portfolios whenever possible.

Additionally, we screen positively for companies that are actively working to reduce their own carbon footprint, for instance by pursuing ambitious energy efficiency targets or by supplying their own energy needs via renewable means like large-scale rooftop solar. Rewarding these positive corporate actors aligns with our pursuit of financial returns, since we find that environmentally forward-looking, sustainable companies are more likely to experience long-term growth. On the fixed income side, whenever possible we invest in green bonds that help finance large-scale sustainable energy and efficiency projects.

Finally, if we hold a stake in an institution we believe can do more to advance the transition to renewable energy, we may use proxy voting, shareholder engagement or direct communication to push the institution to improve.

Taken together, we believe this strategy of fossil fuel divestment, positive screening for institutions that are truly doing their part to reduce greenhouse gas emissions, and engagement with those who fall short, is the best way we can make our clients’ impact felt on climate change.

For more information on how Prentiss Smith & Company considers climate change in our approach to investment, please contact us.