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October 29, 2013
Fossil Fuel Divestment only the First Step
by Robert Kropp
Investors join 350.org to produce a guide on divesting from fossil fuel companies. First of a
“If it’s wrong to wreck the climate, then it’s wrong to profit from that wreckage.”
states Bill McKibben of 350.org, whose 2012 article in Rolling Stone is credited with launching the fossil fuel divestment campaign
that has spread to at least 250 US colleges and universities.
According to a
recently published Oxf
ord University report, more than 40 endowments of colleges and universities have divested their
holdings in fossil fuel companies thus far. Also, the report continues, while previous divestment
campaigns aimed at tobacco companies and apartheid in South Africa “took some years to gather
pace,” the fossil fuel divestment campaign seems to be gathering more widespread support at a
faster rate. “Despite its relatively short history, the fossil fuel campaign can be said to
entering the second wave of divestment,” the report states. The second wave of previous campaigns
occurred when divestment by prominent institutions created “a tipping point that paved the way for
other universities, in the US and abroad, and select public institutions such as cities to also
Sustainable investors have wrestled with arguments of divestment versus
engagement, and many have concluded that engagement provides them with the better opportunity to
pressure fossil fuel companies to change their behaviors. However, in a recently published paper, the sustainable investment firm NorthStar Asset Management
concluded, “Shareholder efforts to convince fossil fuel firms to expand into alternative energy
businesses have proven ineffectual and, as a result some fossil fuel firms have even stopped
trying. SRI investors and their fiduciaries also have a responsibility to consider the cost of NOT
divesting—on people and the planet, as well as on profit.”
For investors contemplating
divestment, 350.org has teamed with Green
Century Capital Management and Trillium Asset Management to produce a divestment guide. Both Green Century and Trillium have offered fossil
free investment opportunities for years.
According to the guide, the demands made on
fossil fuels companies are threefold:
stop exploring for new hydrocarbons;
stop lobbying in
Washington and state capitals to preserve their special breaks; and
pledge to keep 80% of their
current reserves underground forever.
Absenting a sudden reconsideration of its business
model by the industry, the guide outlines several reasons for considering divestment as an option.
One specifically addresses financial risk. On the books of fossil fuel companies are reserves that
the companies consider to be assets. However, a 2011 paper by Carbon Tracker entitled Unburnable Carbon pointed out
that no more than 20% of the reserves currently on the books can be burned if global temperature
increases are to be limited to two degree Celsius.
“Divesting now could allow investors to
reduce their exposure to a possible collapse of the so-called 'carbon bubble,'” the divestment
Addressing the retail investor, the guide observes, “Whether you intended to
or not, it is likely you hold
investments in fossil fuel companies.” Thus the first step in the
divestment process is learning what stocks one actually owns. Reviewing investments in publicly
traded companies should reveal whether one's portfolio includes holdings in the 200 companies with
the largest fossil fuel reserves, a listing of which has been compiled by 350.org. Components of
mutual funds can be identified through the funds' annual reports, and investors who employ
financial advisors should ensure that their divestment requests are understood and carried out.
The guide concludes with recommendations for reinvestment. “Every company has an impact on
climate change and is impacted by climate change,” it states. “Understanding how companies are
identifying and managing these climate risks can help determine which ones are appropriate for your
portfolio.” Those who invest in retirement plans are encouraged to advocate for a fossil free
“Heightened awareness and pressure will help bring about the changes we so
urgently need to address climate change,” the guide concludes.
Next: As You Sow
contributes to a report on cleantech investment.
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