Fossil fuel divestment
Fossil fuel divestment or fossil fuel divestment and investment in climate solutions is an attempt to reduce climate change by exerting social, political, and economic pressure for the institutional divestment of assets including stocks, bonds, and other financial instruments connected to companies involved in extracting fossil fuels.[2]
Not to be confused with Fossil fuel phase-out.
Fossil fuel divestment campaigns emerged on college and university campuses in the United States in 2011 with students urging their administrations to turn endowment investments in the fossil fuel industry into investments in clean energy and communities most impacted by climate change.[3] In 2012, Unity College in Maine became the first institution of higher learning to divest[4] its endowment from fossil fuels.
By 2015, fossil fuel divestment was reportedly the fastest growing divestment movement in history.[5] As of July 2023, more than 1593 institutions with assets totalling more than $40.5 trillion in assets worldwide had begun or committed some form of divestment of fossil fuels.[6]
Effects of divestment[edit]
Stigmatization of fossil fuel companies[edit]
A study by the Smith School of Enterprise and the Environment at the University of Oxford found that the stigmatisation of fossil fuel companies caused by divestment can "materially increase the uncertainty surrounding the future cash flows of fossil-fuel companies."[37] That, in turn, "can lead to a permanent compression in the trading multiples – e.g., the share price to earnings (P/E) ratio of a target company."[37]
The study also says that:
Legal cases[edit]
In November 2014, a group of seven undergraduate, graduate, and law students filed a lawsuit at the Suffolk County Superior Court against the president and fellows of Harvard College and others for "mismanagement of charitable funds" and "intentional investment in abnormally dangerous activities" in relation to Harvard's investments in fossil-fuel companies.[42] In March 2015, the superior court granted Harvard's motion to dismiss. The superior judge wrote: "Plaintiffs have brought their advocacy, fervent and articulate and admirable as it is, to a forum that cannot grant the relief they seek."[43]
In early 2021, students at Harvard and Boston College filed complaints with the Massachusetts Attorney General asserting that fossil fuel investments represented a breach of state laws governing fiduciary duty.[44] In September, Harvard committed to divestment, explicitly citing its fiduciary obligations in the process.[36]
Reaction from the fossil-fuel industry[edit]
In October 2014, ExxonMobil stated that the fossil-fuel divestment was "out of step with reality" and that "to not use fossil fuels is tantamount to not using energy at all, and that's not feasible."[17]
In March 2014, John Felmy, the chief economist of the American Petroleum Institute, stated that the movement to divest from fossil-fuel companies "truly disgusts me" and stated that academics and campaigners who support divestment are misinformed, uninformed or liars. Felmy particularly criticized the environmentalist and author Bill McKibben.[45]
The World Coal Association has pointed out that divesting from the fossil fuel industry does not necessarily result in a reduction of demand for fossil fuels, rather it would result in environmentally conscious investors losing influence over the operation of those companies. Benjamin Sporton, the acting chief executive of the World Coal Association in 2013, claims that coal has been the fastest growing energy source over the last decade and is an important raw material for steel and cement in developing countries.[46]
Exponential growth into a global divestment movement[edit]
From half a dozen college campuses in 2011, calling on their administrations to divest endowments from coal and other fossil fuels and invest in clean energy and "just transition" strategies to empower those most impacted by environmental degradation and climate change, the campaign had spread to an estimated 50 campuses in spring 2012.[47] By September 2014, 181 institutions and 656 individuals had committed to divest over $50 billion.[13] One year later, by September 2015, the numbers had grown to 436 institutions and 2,040 individuals across 43 countries, representing $2.6 trillion in assets, of which 56% were based on the commitment of pension funds and 37% of private companies.[47] By April 2016, already 515 institutions had joined the pledge, of which 27% faith-based groups, 24% foundations, 13% governmental organisations, 13% pension funds and 12% colleges, universities and schools, representing, together with the individual investors, a total of $3.4 trillion in assets.[48] In April 2020, the number of institutions had grown to 1192, with a total combined asset value of $14,14 trillion.[49] As of July 2023, more than 1593 institutions with assets totalling more than $40.5 trillion in assets worldwide had begun or committed some form of divestment of fossil fuels.[6]
Groups involved in divestment campaigns[edit]
People & Planet[edit]
In 2006, the UK-based student campaign network People & Planet launched the Ditch Dirty Development campaign which was an early progenitor to the later divestment campaigns by students in the US and UK. This campaign targeted initially UK government funding for fossil fuel projects and later, alongside PLATFORM and BankTrack, targeted banks like RBS over their funding of oil and gas projects.[50] The campaign is no longer active.