Divestment in fossil fuels — no brainer?
Patricia de Clapiers (Associate October’14) looks more closely at the argument for divestment and realises that as with many thorny issues, the more you know something, the murkier and more complex it becomes.
In March, the Guardian announced that it was to divest its £800 million investment from fossil fuel and asked philanthropist organisations to follow their lead. This campaign instantly seduced the latent tree-hugger that I have become. On the face of it, it is a no-brainer:
- Burning fossil fuels leads up to a build-up of greenhouse gases that results in global warming (as scientists overwhelmingly agree);
- Divestment is a huge signal to give to an industry. It shames companies, brings issues into the open and history shows that it has worked;
- A global leading index has revealed that fossil fuel-free funds outperform conventional ones. They’re also not an investment for the future, unless we decide to cook the planet.
The fact is we are likely to all have stakes in pension or other funds which most certainly include fossil fuel investments so really, the power to act on climate change is with us and putting pressure on organisations to divest appears to be the obvious first step.
However, further research opened my eyes to the fact that, as with many things, it is not this simple, and crucially, may not solve the problem.
- Aside from the immediate but shorted-termed “public perception” impact, divestment is unlikely to have a real financial impact on the industry: as long as there is demand, stocks will be relocated, resulting in greater ownership of these businesses with indifferent investors and with it, the loss of the ability to sit at the board table and ensure there is some control on the extraction industry.
- The big western fossil fuel companies hold only a small portion of the total, most of which is held by states — including, for example, Russia; and
- Mobile phones, fridges and dishwashers — all manufactured with fossil fuels — are not going anywhere and 90% of the planet’s energy need is also provided by fossil fuels — coal, gas and oil.
What does that mean for my no-brainer debate?
If we want to keep our planet alive, we have to stop burning fossil fuel. However, as long as we do not have a sustainable alternative in place to face the world’s demand (which won’t happen overnight), divestment may only have short-term effects — potentially making those on the side of the planet lose the ability to influence these businesses’ direction (for example, in priority, influencing the substitution of the dirtiest fuel of all — coal — for gas).
My learning is that the withdrawal from fossil fuel will have to be gradual, and in transition with the development of renewables. As an individual, my view is that it is definitely worth raising the debate by asking our pension funds to divest out money and redirect these investments in pursuing renewable solutions, but crucially, our role is to actively reduce our own demand for carbon.