Divestment Year in Review 2017
December 27, 2017
Our rapidly changing climate requires that governments be held accountable for the goals rendered within the Paris Agreement. This will require a significant popular movement in 2018 that promotes solutions for local people power to stop fossil fuel projects. It’s the most certain way to accelerate the transition to renewable energy.
A recent declaration signed by economists including James Galbraith, (Boston College professor, GCCM speaker, and MA350 Chair) Juliet Schor, Jeffrey Sachs, and Yanis Varoufasis, called for an immediate end to investments in new fossil fuel production and infrastructure. It also encouraged a dramatic increase in investments in renewable energy, affirming, “it is the urgent responsibility and moral obligation of public and private investors and development institutions to lead in putting an end to fossil fuel development.” The declaration’s authors outline the following points:
- A global transition to a low-carbon future is already well underway.
- Global investor and international development actors and institutions must recognize that continued investments in fossil fuel production supply-side is irreconcilable with meaningful climate action.
- Continued expansion of oil, coal, and gas is exacerbating conflicts; fueling corruption; threatening biodiversity, clean water and air; and, infringing on the rights of Indigenous Peoples and vulnerable countries and communities.
- The global investment community has the power to create the conditions under which this shift away from fossil fuel energy is possible.
- We must all prioritize the tremendous investment opportunities for a 100% renewable future that support healthy economies while protecting workers, communities, and the ecological limits of a finite planet.
Let’s all continue to heed these words and draw upon our own local networks to inform and empower each other about the need for divestment. It is a significant step toward protecting our planet from anthropogenic climate change.
Divestment became a reality for many of us in 2017. We sat with our financial planners and proclaimed that no longer would we be financing and providing social capital for fossil fuel energy consumption. We divested our portfolios, refused fossil fuel sponsorship, did our small parts to defund oil, coal, and gas projects, and sought ways to reinvest in community-driven clean energy solutions. And we joined nearly half of companies globally (43%) that plan to divest in the next two years.
Together, we’re rising up against fossil fuel companies and declaring that climate change is an environmental, social justice, and economic issue. When fossil fuels are removed from the earth, global temperatures rise well beyond the 2°C agreed-upon Paris Agreement threshold required to prevent the worst effects of climate change. To achieve the 2°C target, however, no more than one-fifth of the current proven fossil fuel reserves can be burned. Divestment is absolutely necessary — often referred to as a “moral imperative” — and 2017 saw many global institutions announce their divestment plans.
FossilFree.org is leading the movement to end the age of fossil fuels. It implores us to stand together and call on communities, governments, and institutions to pledge to act for a Fossil Free world. It says that together we must:
- Ban all new coal, oil, and gas projects and begin phasing out those that are already built;
- Divest from and defund fossil fuel projects; and,
- Commit to a rapid, just transition towards 100% renewable energy for all.
The Biggest Divestment Stories from 2017
Major institutions around the globe divested from fossil fuels in 2017, looking beyond the superficial rhetoric of climate change politics to understand fundamental realities of supporting fossil fuels. Fiscal overseers have devoted time, effort, and intellectual energy to the issue, making sense of how fossil fuel extraction and energy use affects the world, physically and economically. They acknowledge the transformation to a low-carbon economy, albeit necessary, will definitely have economic consequences.
Much scholarly support backs up the decision to divest and suggests that reserves of fossil fuels could become “stranded assets.” Stranded assets refer to a stated value that is based on fossil fuel reserves that can never be burned if there is to be hope of stabilizing planetary climate. These assets become virtually worthless as countries battle climate change.
Global Investment Momentum
In May, 2017, people at over 450 events in 60 countries stood together and declared that fossil fuels are ruining the climate — and it’s wrong to profit from the destruction. From the Pacific Islands to South Africa, from the United States to Germany, individuals who were part of the Global Divestment Mobilization demanded that governments, universities, and financial and religious institutions stop investing in the self-centered industries that are destroying the planet. As a massive turning point in the divestment movement, people across six continents fought to de-legitimize the fossil fuel industry.
Norwegian Central Bank Recommends Divestment
A letter to the Norwegian Finance Ministry that the nation needs to diversify its investments sent a chill through fossil fuel companies around the globe. The announcement that Norway’s $1 trillion sovereign wealth fund has lost faith in international petroleum companies is the biggest advancement yet for a fossil fuel free world. The Norwegian Central Bank, which manages the fund, made the recommendation in November, 2017 but had Parliament’s approval in 2015 to begin removing assets in mining companies and utilities that depend on burning coal.
The potential Norwegian divestment of oil is not expected to happen until late 2018 at the earliest.
“It sends a signal that others could follow, and if this becomes a growing movement it could have a material impact,” said Brian M. Youngberg, senior energy analyst at Edward Jones Investments. “It shows the global environmental movement continues to gain steam.” Norway is a major oil-producing country that also has roughly $35 billion invested in oil companies such as Exxon Mobil, Royal Dutch Shell, Total, and Chevron.
A Network of Catholic Organizations Spurred Divestment in 2017
The Global Catholic Climate Movement is a response to Pope Francis’ call in the Encyclical (Laudato Si’ encyclicald) to understand the interconnections between humanity and the living earth. A group of 40 Catholic institutions announced in October, 2017 that they were divesting from fossil fuel companies and investing in renewable energy.
The commitment is part of a response to the COP21 statement of Catholic Bishops from all continents. 2017 divestment included the first Catholic bank, several highly significant institutions in Assisi, archdioceses, dioceses, religious orders, and lay organizations. A complement of important Catholic institution municipal partners also signed on. (Aside: Did you know you can take an online course about the Encyclical? Too cool!)
The Church of England Is Pressured by Its Clergy to Divest from ExxonMobil
A journal paper analyzing ExxonMobil’s activities from 1977–2014 has provided the support a group of five bishops and dozens of clergy needed to implore the Church of England to divest. A letter to The Guardian and to the Church cites that “moral leadership” can emerge through investment policies. Investment funds worth more than $5tn have already been committed by the Church of England to divest from fossil fuels.
ExxonMobil has been criticized for its climate change communications, which promote doubt and mislead the public. The journal paper cited that, while 83% of peer-reviewed papers and 80% of internal documents acknowledged that climate change is real and human-caused, only 12% of ExxonMobil’s advertorials did so, with 81% instead expressing doubt. The company is facing legal action in the US over the same issue.
Archbishop Justin Welby, the leader of the Church of England who worked for a decade in the oil industry before becoming a priest, described climate change as pushing us toward disaster. “It is not a distant danger – it is already with us,” he said in a New York Timeseditorial. “As we continue to burn fossil fuels, its effects will only grow.”
One Planet Summit Divestment Announcements
On the second anniversary of the adoption of the Paris Agreement, world leaders at the One Planet Summit gathered to reiterate how shifting financial wealth away from the fossil fuel industry will contribute to a low-carbon future that will benefit peoples and livelihoods.
Patricia Espinosa, Executive Secretary of UN Climate Change, said that a global reality is possible to deliver a climate secure future for all corners of the Earth. Divestment is contributing, she said, to the sustainable future of “every man, woman and child.” Mobilized divestment is increasingly pointed toward a transformation of the world’s energy to agricultural sectors, and such alignment of multiple global economic areas around climate action has endowed investors with a sense of urgency. It has also spurred a realization of the scale required to achieve divestment goals.
The conveners of the Summit – French President Emmanuel Macron, World Bank President Jim Yong Kim, and UN Secretary-General António Guterres – signed a Declaration to welcome the outcomes of the event, which launched an array of landmark commitments.
Harvard University Put a Pause on Fossil Fuel Endowment Investments in 2017
Under pressure from a group called Divest Harvard and others, Harvard University agreed in 2017 to pause investments in some fossil fuel interests. A campaign by students and environment groups had demanded that the university freeze new investments in fossil fuels, divest from direct holdings in the top 200 publicly listed fossil fuel firms, and rid themselves of all indirect ties within five years. The activism was partially the result of Harvard’s $36bn endowment investment in a portfolio that contains fossil fuel companies. While Harvard hasn’t declared a full moratorium on fossil fuels, campaigners celebrate the hiatus as a watershed moment in a lengthy and often contentious fight.
Bill McKibben, co-founder of climate campaign group 350.org, said, “Harvard is divesting through the back door – testimony to the great pressure applied by students, faculty, and alumni, but also to its establishment unwillingness to simply say forthrightly: the fossil fuel age must end. Still, the significance is enormous: the richest and most famous educational institution on our planet is now siding with the future, not the past.”
End-of-2017 Divestment Successes
As 2017 closed, a number of prominent fund managers announced that they would divest from fossil fuel holdings. Such removal of investment assets — including stocks, bonds, and funds designated for companies involved in extracting fossil fuels — will work to reduce climate change by tackling its essential causes.
Gov. Andrew Cuomo of New York announced that he’ll work alongside state Comptroller Thomas DiNapoli to lay out a roadmap for New York’s $200 billion Common Fund to divest from its fossil fuel holdings. The philosophical change in the state’s enormous state pension fund is a component of what Cuomo referred to as a “de-carbonization” effort. The New York plan is to create an advisory panel to guide investments in clean technology and efforts to combat climate change.
The fund serves 1 million+ people and, until recently, contained more than 50 oil and gas companies as investments. These 50 have been designated as among the world’s 100 most carbon-intensive.
Britain’s government will introduce new investment regulations that will allow individuals and wealth managers to “have their say on where their money is invested.” The announcement by Guy Opperman, the minister for pensions and financial inclusion, puts social value at the core of Britain’s pensions system, dually reflecting members’ ethical concerns and addressing environmental problems.
The move to allow Britain’s workplace pension schemes to convert shares in oil, gas, and coal companies was, until recently, stymied by “fiduciary duties” that put profit above the threat of climate change. The new regulations will bring to life recommendations that had been originally made in 2014. Britain’s pension schemes will now be able to redirect about £87bn a year from gas and oil companies such as BP and Shell.
Axa, the global financial services company, has divested from US oil pipelines and ended its policy of providing insurance for them. Axa has divested from 25 tar sands companies as well as from three major pipelines needed to deliver their oil to market. By ending the insurance it provides, the divestment will total about €700m.
Moreover, by 2020, it will increase its green investments 5x. Axa began to divest from its coal investments in 2015, with a €500m divestment, and this month the company removed 100 companies that acquire more than 30% of their revenue from coal.
Does Divestment Make Any Real Difference?
Part of a divestment strategy is assessing how best to allocate capital. We want to put our capital to good use: from making investments in small cap funds and digital capabilities to supporting local businesses and clean energy initiatives. [If you’re not sure if your funds support fossil fuel polluters, you can screen your funds for 200 of the largest owners of carbon reserves, using data compiled by Fossil Free Indexes℠.]
Sure, some people question whether the intent to reduce exposure in investments linked to fossil fuels really does make an impact in fossil fuel companies’ viability. A team of researchers at the School of Environment, Enterprise and Development (SEED) at the University of Waterloo have an answer to that question.
They recently conducted an analysis that suggests divestment announcements have a statistically significant negative impact on the price of fossil fuel shares. Conducting a study that aggregated the impact of more than 20 announcements across 200 publicly traded fossil fuel companies, their results suggest that share prices dropped on the days that institutional investors announced they were divesting of fossil fuels.
Divestment announcements by prominent investors signal financial risks to the market, which, in turn, depress share prices. Therefore, divestment announcements can have a measurable impact on the fossil fuel industry. The study’s authors argue that decreasing share prices make acquiring financial capital more expensive for the fossil fuel industry. That lowers their ability to “explore new resources, exploit proven reserves, and secure long-term growth.” The results? Divestment can lead to lower fossil fuel productive capacity and lowered greenhouse gas emissions.
This post was written by Marie Venner