How Fossil Fuel Divestment affects Oil and Gas financing
Conventional wisdom questions the value of divestment, but this study finds that fossil fuel divestment is negatively associated with capital flows to oil and gas companies. As anti-fossil fuel norms develop, banks are less willing to invest in fossil fuels.
The value of total assets pledged for divestment in a given country is negatively associated with capital flows to domestic oil and gas companies, particularly when divestment is led by regional or sovereign governments
One reason for (global GHG to continue to climb) is that despite new investment in renewable energy reaching a historical high (BNEF, 2019), we have also reached historical highs in funding of fossil fuels (EY, 2014) and many countries have already committed to building fossil fuel infrastructure which would take the world past 2°C warming (Pfeiffer et al., 2018).
In the past decade, the relationship between the financial industry and the fossil fuel industry has started to be shaped by the rise of anti-fossil fuel norms. Given the slow progress of government policies to adequately address climate change, and recognising the substantial influence the fossil fuel sector has on the policy-making process (Carroll et al., 2018; Zietsma, Ruebottom and Slade Shantz, 2018; Le Billon and Kristoffersen, 2019), social activism has turned against the fossil fuel sector.
The movement has been conceptualised by scholars as a nonstate governance intervention operating through symbolic political action and through the active management of antifossil fuel norms (Ayling and Gunningham, 2017; Green, 2018). In other words, the divestment movement has been focusing on investors in the fossil fuel sector without involving formal regulatory intervention, although the expectation has been that government action would follow social action (Gunningham, 2017b).
