For both moral and economic reasons fossil fuels are a poor investment while clean energy investing has a bright and lucrative future.
Fossil fuel divestment is one of the
fastest growing movements on Earth and it continues to gain momentum.
Since the divestment movement was launched three years ago, more than
650 individuals and 180 institutions, including 50 new foundations,
which hold over $50bn in total assets, have pledged to divest from
fossil fuels. Whether in the form of mutual funds, stocks, hedge
funds or bonds, fossil fuels are being abandoned at ever increasing
rates.
As explained by the New
York Times on Sept. 6, “In the 1980s, it
was South Africa. In the 1990s, it was tobacco. Now fossil fuels have
become the focus of those who would change the world through the
power of investing.” This is about more than just divestment,
this is a global movement towards a low carbon economy. Mitchell
Krauss, of Capital Intelligence Associates,
called divestment “the biggest, hottest topic.”
York Times on Sept. 6, “In the 1980s, it
was South Africa. In the 1990s, it was tobacco. Now fossil fuels have
become the focus of those who would change the world through the
power of investing.” This is about more than just divestment,
this is a global movement towards a low carbon economy. Mitchell
Krauss, of Capital Intelligence Associates,
called divestment “the biggest, hottest topic.”
The background for divestment is made
by increasing temperatures, rising emissions and growing numbers of
extreme weather events. Our current trajectory is unsustainable and
fossil fuels represent the most significant causal factor
contributing to climate change. In the absence of action, we will
surpass irreversible tipping points from which we will not be able to
recover. According the the EIA, if we continue with business as
usual, we will see temperature increases of 5.3 degrees Centigrade by
2100. This is more than 3 degrees above the internationally accepted
2 degree Celsius upper threshold limit. If we do nothing, oceans will
rise between 3 and 6 feet in this century, flooding hundreds of
cities around the world.
by increasing temperatures, rising emissions and growing numbers of
extreme weather events. Our current trajectory is unsustainable and
fossil fuels represent the most significant causal factor
contributing to climate change. In the absence of action, we will
surpass irreversible tipping points from which we will not be able to
recover. According the the EIA, if we continue with business as
usual, we will see temperature increases of 5.3 degrees Centigrade by
2100. This is more than 3 degrees above the internationally accepted
2 degree Celsius upper threshold limit. If we do nothing, oceans will
rise between 3 and 6 feet in this century, flooding hundreds of
cities around the world.
The good news is that there is still
time to reverse this troubling trend and divestment from fossil fuel
is a crucial first step. Divestment is not only about taking money
out of an industry that causes climate change, it is also about
diminishing big oil’s political clout.
time to reverse this troubling trend and divestment from fossil fuel
is a crucial first step. Divestment is not only about taking money
out of an industry that causes climate change, it is also about
diminishing big oil’s political clout.
IPCC AR5
There is a 97 percent consensus among
scientists that humans are causing global warming and they know that
if we are to have any hope of managing climate change, we must leave
the vast majority of the world’s fossil fuel reserves in the ground.
scientists that humans are causing global warming and they know that
if we are to have any hope of managing climate change, we must leave
the vast majority of the world’s fossil fuel reserves in the ground.
The Intergovernmental Panel on Climate
Change (IPCC) Fifth Assessment Report (AR5), makes it clear that
burning fossil fuels at the current rate is incompatible with the
kind of emissions reductions needed to curb climate change. To stay
within the upper threshold warming limit, we will have to lower
global greenhouse gas emissions (GHG) by 40 to 70 percent below 2010
levels by 2050. The report states that we will need to divest at
least $30 billion dollars per year from fossil fuels over the coming
decades.
Change (IPCC) Fifth Assessment Report (AR5), makes it clear that
burning fossil fuels at the current rate is incompatible with the
kind of emissions reductions needed to curb climate change. To stay
within the upper threshold warming limit, we will have to lower
global greenhouse gas emissions (GHG) by 40 to 70 percent below 2010
levels by 2050. The report states that we will need to divest at
least $30 billion dollars per year from fossil fuels over the coming
decades.
Recent Divestment
A Carbon Tracker report titled Unburnable Carbon indicates that 22
cities, 2 counties, 20 religious organizations, and 6 other
institutions have committed themselves to divest from fossil fuels.
These efforts are being jointed by public pension funds. Since
January 2014, more than one hundred campuses, churches, cities,
states, hospitals, pension funds, and others in the United States and
abroad have divested from fossil fuels. Early this year,
350.org convinced seventeen foundations, controlling nearly $1.8
billion in investments, to commit to pulling their money out of
fossil fuels. In the last month alone, a number of major initiatives
were launched. One major institutional investor that recently
divested is the $860m Rockefeller Brothers Fund.
Universities
University students are supporting
climate
action and divestment in particular. Driven by
student demand, universities are divesting and in many cases, they
oversee huge endowments. In May of this year, Stanford University
announced that it will no longer use any of its $18.7 billion
endowment to invest in coal mining companies. Pressure is mounting at
Harvard and Yale and other schools to do the same. According to
Carbon Tracker, nine colleges and universities have also divested.
climate
action and divestment in particular. Driven by
student demand, universities are divesting and in many cases, they
oversee huge endowments. In May of this year, Stanford University
announced that it will no longer use any of its $18.7 billion
endowment to invest in coal mining companies. Pressure is mounting at
Harvard and Yale and other schools to do the same. According to
Carbon Tracker, nine colleges and universities have also divested.
Oil industry
The oil industry anticipates that thier
profits will be eroded by divestment and declining demand associated
with efforts to curtail climate change. In its annual and strategic
report for 2013, Royal Dutch Shell said that increasing concern over
climate change will lead to new regulations that will hit the
company’s production profitability and delay some of its projects.
profits will be eroded by divestment and declining demand associated
with efforts to curtail climate change. In its annual and strategic
report for 2013, Royal Dutch Shell said that increasing concern over
climate change will lead to new regulations that will hit the
company’s production profitability and delay some of its projects.
Drivers
In support of climate science, people
are coming together to demand that we transition away from fossil
fuels. On a governmental level, divestment is being driven by
renewable energy support schemes and emission regulation.
are coming together to demand that we transition away from fossil
fuels. On a governmental level, divestment is being driven by
renewable energy support schemes and emission regulation.
While climate change is commonly
understood as an environmental issue, it is first and foremost a
health issue. That is why some healthcare professionals are
at the forefront of divestment.
understood as an environmental issue, it is first and foremost a
health issue. That is why some healthcare professionals are
at the forefront of divestment.
In addition to the moral argument,
divestment from fossil fuels is being driven on purely financial
grounds. Former SEC Commissioner Bevis
Longstreth made a convincing financial case for
divestment stating that fossil fuels make no sense in the context of
expected governmental restrictions on carbon, advances in clean
alternatives, growing public awareness about the dangers of high
carbon fuels, investor actions to curtail high carbon investments and
reputational risks.
divestment from fossil fuels is being driven on purely financial
grounds. Former SEC Commissioner Bevis
Longstreth made a convincing financial case for
divestment stating that fossil fuels make no sense in the context of
expected governmental restrictions on carbon, advances in clean
alternatives, growing public awareness about the dangers of high
carbon fuels, investor actions to curtail high carbon investments and
reputational risks.
Carbon Bubble
Concerns about a carbon bubble are at
the core of the financial logic driving divestment. A number of
reports have made the case for fossil fuel divestment, warning
against exposure to the carbon bubble.
the core of the financial logic driving divestment. A number of
reports have made the case for fossil fuel divestment, warning
against exposure to the carbon bubble.
Oil and gas
companies continue to invest massive sums of money into sourcing and
exploiting new fossil fuel reserves. In 2013, the top 200 oil and gas
firms allocated $674 billion in exploration and the removal of new
fossil fuel reserves. This is the equivalent of the combined GDPs of
the Netherlands and Belgium combined.
companies continue to invest massive sums of money into sourcing and
exploiting new fossil fuel reserves. In 2013, the top 200 oil and gas
firms allocated $674 billion in exploration and the removal of new
fossil fuel reserves. This is the equivalent of the combined GDPs of
the Netherlands and Belgium combined.
Carbon budget
Between 2000 and 2050, the allowable
“Carbon Budget” to keep the Earth below 2 degree Celsius of
warming is about 886 gigatons. One third of that amount has been
burned so far. To stay within our budget, we can burn an additional
565 gigatons by 2050. However, the 200 largest fossil fuel companies,
combined with government-owned companies, currently have a total of
2795 gigatons.
“Carbon Budget” to keep the Earth below 2 degree Celsius of
warming is about 886 gigatons. One third of that amount has been
burned so far. To stay within our budget, we can burn an additional
565 gigatons by 2050. However, the 200 largest fossil fuel companies,
combined with government-owned companies, currently have a total of
2795 gigatons.
Stranded assets
Only 20 percent of the world’s total
proven fossil fuel reserves can be burned if we are to have a hope of
curtailing climate change. To mitigate the risk, investors are acting
and will continue to act to divest. Failure to divest prior to an
inevitable correction will prove costly.
proven fossil fuel reserves can be burned if we are to have a hope of
curtailing climate change. To mitigate the risk, investors are acting
and will continue to act to divest. Failure to divest prior to an
inevitable correction will prove costly.
According to Tim
Ratcliffe, European divestment co-ordinator at
the campaign group 350.org., “fossil fuel companies are currently
grossly overvalued. Eighty percent of their oil, coal and gas
reserves need to stay underground to limit global warming below 2C,
which will turn them into stranded assets.” Ratcliffe added, “This
makes these investments a highly risky gamble.”
Ratcliffe, European divestment co-ordinator at
the campaign group 350.org., “fossil fuel companies are currently
grossly overvalued. Eighty percent of their oil, coal and gas
reserves need to stay underground to limit global warming below 2C,
which will turn them into stranded assets.” Ratcliffe added, “This
makes these investments a highly risky gamble.”
Impax Asset Management further
concludes that even today, fossil fuel free portfolios that include
cleaner sources of energy outperform the average portfolio.
concludes that even today, fossil fuel free portfolios that include
cleaner sources of energy outperform the average portfolio.
Clean energy
Divesting from fossil fuels is just the
first part of a three stage strategy that includes radical energy
efficiency. We must also massively invest in renewable forms of
energy if we are to succeed in meeting our energy requirements. Money
divested from fossil fuels and invested in clean energy will drive
down the price of renewable energy.
first part of a three stage strategy that includes radical energy
efficiency. We must also massively invest in renewable forms of
energy if we are to succeed in meeting our energy requirements. Money
divested from fossil fuels and invested in clean energy will drive
down the price of renewable energy.
“Freeing up resources through the
divestment allows us to concentrate on the renewables future,” said
Richard Woo, chief executive of the Russell Family Foundation, “and
to really see the marketplace as a platform for this kind of change.”
divestment allows us to concentrate on the renewables future,” said
Richard Woo, chief executive of the Russell Family Foundation, “and
to really see the marketplace as a platform for this kind of change.”
Global investment in clean technologies
now amounts to about $300 billion a year. According to the IPCC AR5
report, we will need to see an annual investment in low carbon
electricity supply of $147 billion a year. According to the
International Energy Agency, we will need to reach investments of $1
trillion a year by 2030 in order to stay within the upper threshold
limit of 2C of warming.
now amounts to about $300 billion a year. According to the IPCC AR5
report, we will need to see an annual investment in low carbon
electricity supply of $147 billion a year. According to the
International Energy Agency, we will need to reach investments of $1
trillion a year by 2030 in order to stay within the upper threshold
limit of 2C of warming.
Difficult road ahead
We still have a long road ahead before
we achieve anything close to divestment from all fossil fuels.
Governments still subsidize fossil fuels to the tune of 1.9 trillion
a year. The big banks continue to invest in fossil fuels and most of
the money invested around the world is in some way connected to
fossil fuels.
we achieve anything close to divestment from all fossil fuels.
Governments still subsidize fossil fuels to the tune of 1.9 trillion
a year. The big banks continue to invest in fossil fuels and most of
the money invested around the world is in some way connected to
fossil fuels.
According to Greenpeace,
about $800 for each person on the planet is invested into fossil fuel
companies through the global capital markets alone. That’s roughly
10 percent of the total capital invested in listed companies. A total
of 5.5 trillion dollars is invested into the 200 biggest fossil fuel
companies through financial markets.
about $800 for each person on the planet is invested into fossil fuel
companies through the global capital markets alone. That’s roughly
10 percent of the total capital invested in listed companies. A total
of 5.5 trillion dollars is invested into the 200 biggest fossil fuel
companies through financial markets.
It will be difficult to unseat these
dirty energy behemoths. However, divestment succeeded in putting an
end to the apartheid regime in South Africa and Mahatma Gandhi’s
“passive resistance” managed to get Britain out of India.
If a skinny little man in a loin cloth was able to defeat the British
Empire, surely the combined energies of millions of people around the
world can overcome big oil.
dirty energy behemoths. However, divestment succeeded in putting an
end to the apartheid regime in South Africa and Mahatma Gandhi’s
“passive resistance” managed to get Britain out of India.
If a skinny little man in a loin cloth was able to defeat the British
Empire, surely the combined energies of millions of people around the
world can overcome big oil.
The day of the huge integrated
international oil company is drawing to a close. The only question is
whether we can substantially reduce our fossil fuel use in time to
avert catastrophe. The longer we delay action to foster the low
carbon transition, the more expensive addressing climate change will
get.
international oil company is drawing to a close. The only question is
whether we can substantially reduce our fossil fuel use in time to
avert catastrophe. The longer we delay action to foster the low
carbon transition, the more expensive addressing climate change will
get.
Fossil fuels are a bad investment and
their use poses an existential threat to the entire planet. These are
powerfully compelling reasons to divest.
their use poses an existential threat to the entire planet. These are
powerfully compelling reasons to divest.
Source: Global Warming is Real
Related
Video – Why You Should Divest from Fossil Fuels
Infographic – Why You Should Sell Your Fossil Fuel Stock Now (DC Divest)
Video – Growing Momentum for Fossil Fuel Divestment
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Rockefeller Brothers Fund to Divest from Fossil Fuels
The Global Divest-Invest Coalition and Campaign
Divestment from Coal Foreshadows the Fate of All Fossil Fuels
Climate Change is a Heath Problem and Divestment is the Cure
Charitable Organizations and Philanthropists are Being Encouraged to Divest from Fossil Fuels
Bill McKibben Talks about Divestment from Fossil Fuels in a Fortune Interview
Video – Investment and Divestment: Making Sustainable Choices with Campus Endowments
European Commissioner for Climate Action Urges Development Banks to Divest from Fossil Fuels
Video – Bill McKibben on Faith and Fossil Fuel Divestment
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Video – A Debate about the 350.org Fossil Fuel Divestment Campaign
Video – Bill McKibben Makes the Case for Fossil Fuel Divestment at Middlebury College
Students Advocating Divestment from Fossil Fuels
