Stanford University's recent divestment from coal companies may be a sign of more large investors ditching their fossil fuel exposure—and more taking climate change seriously as a portfolio risk.
"I think we're at a tipping point," Bob Litterman, chairman of the risk committee for $2 billion hedge fund firm Kepos Capital, said Tuesday about the potential for others to copy Stanford's move at the New York Society of Security Analysts' Sustainable Investing Conference in New York City.
"There's going to be a lot of focus in the next couple years on what is the social cost of carbon, how do we create appropriate incentives and, as investors wake up to the fact that this is happening, we're going to see more divestment, more investment in the next generation (of energy)."
Litterman is one of the most senior risk officers on Wall Street. Before joining Kepos in 2010, he spent 23 years at Goldman Sachs. Among other roles, Litterman was head of risk and oversaw the bank's quantitative investment strategies group. He also co-developed the Black-Litterman Global Asset Allocation Model, a widely cited portfolio risk management tool.