Are Divestments Working?
Last Updated on
What We’re Dealing With
Divestment is “the act of selling off a business/es, or of no longer investing money in something,” (Cambridge Dictionary). Basically pulling your money from organizations that you no longer believe to be of sound investment, or that you have come to disagree with as a result of their corporate actions and operations.
In the context of climate change, the movement to divest represents the growing trend to withdraw investments from companies that deal in fossil fuels (such as coal & petroleum), and consequently endanger our future and that of the planet.
Oil companies make up some of the largest corporations on the planet, and it takes an astounding amount of money to maintain and grow their operations. In their pursuit of their extraction ambitions, these companies also spend huge sums of money on influencing government policies and public opinion (see Pulling the Strings).
This in turns earns them considerable tax breaks and subsidies, as well as the ability externalize much of the environmental costs. Still, all these breaks are not enough, and fossil fuel companies also collect and require significant cash injections from private investors.
Follow the Money
These investors may in fact be wealthy individuals, but often times they are management funds, or collective investments, from a large number of people who may not be fully aware of where exactly their money is ending up.
For many, this type of investment may come in the form of pensions savings, where the initial priority is often the financial return, rather than what organizations the funds are supporting. This pattern of passive investment on behalf of citizens is what social and environmental activists are drawing attention to with their call to “go fossil free.”
Moving Things Along
The movement began in 2011 as a result of some impassioned university students who urged their schools to divest their savings (endowments, etc.) away from fossil fuel operations that are directly contributing to climate change and threatening the planet.
By their nature, schools are to prepare students for the future, and for many such institutions (ex. the Universities of Stanford, Syracuse, Stockholm, etc.) this financial action, instigated by students, was a natural progression of that thinking. It was certainly encouraging to have the support of the school and faculty, but make no mistake, it was motivated students that helped bring this change.
Breaking Free of Fossil fuel Dependence
Global fossil fuel divestments have since surpassed $5 tn (yes, trillion)! The enormous figure, was actually passed back in December 2016, but I don’t have the latest updated number, as it’s still increasing constantly. It really is a planetary initiative with governments and institutions from around the world pledging their commitments to divest from carbon extraction.
One way to obtain visibility on some of this activity is through Go Fossil Free, the organization that actively supports (and keeps track of) the movement. It was founded as an offshoot of 350.org, an organization dedicated to ensuring fossil fuels are kept in the ground so that the planet does not pass the perilous 350 PPM (Parts Per Million) that is considered by climate scientists as the number which should not be passed if we want to avoid potential runaway climate change.
The Moral Argument
Progress is being made! Hundreds of institutions from around the world have committed to divesting from fossil fuels. These include universities and management funds, as well as corporations and charities. Of particular significance is the commitment from the Rockefeller family, whose patriarch (John D.) started Standard Oil, the original American petroleum monopoly that was later broken up into several other oil giants, including Exxon Mobil.
These very same Rockefeller descendants declared Exxon’s actions “morally reprehensible,” (actions that include covering up the knowledge/studies that the company had of fossil fuel extraction directly contributing to climate change, instead spending millions on lobbying and campaigns to convince the public to the contrary).
End of the Line
Along with divesting from fossil fuels, the Rockefeller Family Fund issued a statement which included, the strong conviction that “we must keep most of the already discovered reserves in the ground if there is any hope for human and natural ecosystems to survive and thrive in the decades ahead,” (The Guardian).
The Rockefeller Brothers Fund, yet another Rockefeller philanthropic organization, has also followed suit (RBF). Granted, this particular Rockefeller charity represents an endowment fund of only $924 million, but it is effective in helping signal the end of the oil era.
Divestments Are Growing
Along with schools and charities, local and state governments have also pledged their commitments to divest their funds from fossil fuels. These include the cities of Berlin, Paris, Melbourne, and more recently the city of New York, who’s mayor made the announcement this past January.
Not to be outdone by the city, New York’s Governor Andrew Cuomo has called for divesting the state’s pension assets from any carbon related activities. These cities and states are contributing to a growing list of governments that are both committing to divestment, as well as revoking fossil fuels altogether.
Of the various governments that have joined the movement, Norway’s addition is especially compelling. The country itself isn’t particularly large in terms of size (69th) and population (about 5 million), but it does represent a sizable financial influence.
Indeed, Norway’s modern wealth was in fact generated from fossil fuels (oil & gas reserves), however the government of Norway also made it a point to save funds from their resource extraction knowing full well that it had to plan for a future without fossil fuels.
Norway’s sovereign wealth fund is called The Government Pension Fund Global (GPFG), and its mandate is “saving for future generations in Norway. One day the oil will run out, but the return on the fund will continue to benefit the Norwegian population,” (Norges Bank).
The fund is now valued at over 1 trillion dollars (over 1.3 percent of all globally listed stocks), and recently proposed divesting from fossil fuels as part of its risk mitigation ( November 16, 2017). The Norwegian factor is certainly a positive indication of the growing momentum within the divestment movement.
It’s Only a Matter of Time
Finally, some more good news for the financial renouncement of fossil fuels came this past December at the One Planet Summit in Paris. Held on the second anniversary of the Paris Climate Accord, the President of France invited world leaders and businesses to discuss the climate change action plan, and make further advancements towards diminishing fossil fuel extraction and consumption.
One outstanding development came from the World Bank’s announcement to no longer fund new oil and gas initiatives after 2019 (as well as taking other actions to de-carbonize, and support sustainability).
French insurance giant AXA, and Dutch bank ING also joined other corporations in their pledge to divest from fossil fuels, providing the additional commitment to terminate their insurance for US pipeline projects as well as the Canadian tar sands.
While pulling these funds from such operations may not have forcibly ended them, these proclamations from the One Planet Summit serve to strengthen the resolve of the international community and provide a model for the financial industry.
Divestments are working! They represent a natural alignment between social and financial interests, and serve as both a symbolic and practical approach towards ending the global fossil fuel dependency and prioritizing the need to protect the planet for our collective future.