What is Divestment?
In finance and economics, divestment or divestiture is the reduction of some kind of asset for financial, ethical, or political objectives or sale of an existing business by a firm. A divestment is the opposite of an investment. ~ Wikipedia
Divestment is a simple way for us all to make a change in our economic climate. It involves taking money away from the companies involved in extracting fossil fuels.
The video clip below explains how Divestment could be used with great success to encourage companies to STOP BURNING and leave fossil fuels in the ground.
The only way that many companies will ever change their behaviours for the good of the planet is through political pressure. We can continue to spread the word on organisations that put their profits before the greater good, by continuously using our limited resources, extracting and burning fossil fuels rather than looking for an alternative. Then we can all make an active and informed choice about the companies that we invest with.
If you do not purchase shares you may think that you are not able to use your money to make a difference through divestment, but you could be wrong. Investments of different kinds, including stocks and bonds including pensions will usually be ploughed into various organisations on your behalf. You can decide if there are companies that you wish to boycott from your portfolio. You may realise that you have had shares in a company, with practices that you absolutely disagree with.
Divestment is an opportunity to move our money away from the problem of extracting fossil fuels, and towards the solution. We can shame companies into changing their behaviour for the good of us all.
Divestment and Apartheid
It was a tactic used in South Africa, suggested by Nelson Mandela during Apartheid. By the mid-1980s, 155 campuses had divested from companies doing business in South Africa. 26 state governments, 22 counties, and 90 cities removed their investments from multinational organisations that did business in the country. Eventually, public pressure lowered targeted companies’ stock prices and they were left with no option but to comply with the activists’ demands.The campaign helped play a part in ending the Apatheid era, paving the way for democracy and equality. Although a study conducted in 1999 suggested that Divestment did not visibly affect the financial standing of the companies that were targeted.
Despite the prominence and publicity of the boycott and the multitude of divesting companies, the financial markets’ valuations of targeted companies or even the South African financial markets themselves were not easily visibly affected. The sanctions may have been effective in raising the public moral standards or public awareness of South African repression, but it appears that financial markets managed to avoid the brunt of the sanctions.
Global Divestment Day
Go Fossil Free is an organisation devoted to raising the awareness of Fossil Fuels and the power that divestment may play in changing our future. You can read their biggest accomplishments in a report linked here. They inspired a Global Divestment Day last year which was supported by many cities throughout the world.
At over 450 events in 60 countries, people around the world declared that it’s wrong to wreck the climate — and it’s wrong to profit from wrecking it. From the Pacific Islands to South Africa, from the United States to Germany, we stood up to demand that our governments, universities and financial and religious institutions stop investing in the rogue industries that are destroying our planet. It was a massive turning point in the divestment movement with people across six continents fighting to de-legitimize the fossil fuel industry.
Divest for Our Future
The following quote is from an article written by Harvard Political Review undergraduate students, (not the staff of Harvard’s Institute of Politics).
A coalition known as Students for a Just and Stable Future (SJSF) has called for the Harvard Management Company to divest from fossil fuel companies. Citing concerns about the environment and the energy industry’s outsized lobbying influence, they’ve started a campaign known as “Divest for Our Future.” Their goal is to persuade university endowments to wind down positions in firms that have large reserves of oil, coal, and natural gas.
“Climate change is probably the defining social justice issue of our time,” said Alli J Welton, a board member of the Harvard chapter of SJSF. “We have very few years left to really change fossil fuel practices before we’re locked into irreversible warming. It might seem abstract, but this takes its toll on people’s lives and the economy.”
The students want Harvard to invest in companies that support a brighter future, divesting from those that are actively extracting fossil fuels. The companies that they targeted can be found here. The University already supports sustainable initiatives, and these can be seen here.
This movement toward Fossil Fuel Divestment is becoming a trend with many Universities and colleges beginning to follow suit. Over 40 cities across the world, religious institutions and individuals are also starting to remove their money. Most notably Oslo announced recently that it would divest $7 million worth of coal investments from its pension fund.
We believe active ownership and engagement are appropriate primary tools for the GPFG to use to address climate-related issues. We recommend ways of enhancing the Fund’s efforts in this area. We also propose that the Fund continues to support relevant climate change research. Finally, we propose a mechanism whereby the worst cases of climate offenders can be excluded from the Fund on a case-by-case basis. The ownership efforts should be the primary tool, and the exclusions and engagement processes should work together in a coordinated way.
Does Divestment Work?
Divestment has been successful in the past, as mentioned it was used against the South African Apartheid regime, and has also been used in the battle against the advertising of tobacco. It can work due to a few factors, and not always financially. It can destabilise a company if enough people remove their investments. It can also prevent new investors from ploughing money in as the organisation may start to be seen as a risk. As the issue becomes more public large companies cannot continue to ignore the underlying reasons for being targeted. Damage control tactics may need to be employed to prevent lasting damage to the brand and the company as a whole, and this could force the organisation in question to address their unpopular practices.
The Coal Industry
The World Coal Association (WCA) has retaliated to the growing number of Divestors, stating that “coal plays a vital role in society by providing 40% of global electricity and as an indispensable ingredient in modern infrastructure.”
“Calls for divestment ignore the global role played by coal and the potential offered by HELE and CCUS technologies. It is essential that responsible investors actively engage with the coal industry. All low emission technologies are needed to meet climate targets. We cannot meet our energy needs, tackle energy poverty and reduce global emissions without utilising all options available to us, including low emissions coal.”
Fossil Fuel Divestment is beginning to gain momentum. The UN Framework Convention on Climate Change (UNFCCC) has even expressed supporting for the campaign. Nick Nuttall, spokesman for the UNFCCC had the following to say:
“We support divestment as it sends a signal to companies, especially coal companies, that the age of ‘burn what you like, when you like’ cannot continue. Everything we do is based on science and the science is pretty clear that we need a world with a lot less fossil fuels. We have lent our own moral authority as the UN to those groups or organisations who are divesting. We are saying ‘we support your aims and ambitions because they are fairly and squarely our ambition,’ which is to get a good deal in Paris.”
Unsurprisingly, the Independent Petroleum Association of America (IPAA) has commissioned a paper which states that “fossil fuel divestment is a bad idea” economically.
So even if Divestment does not make a huge financial dent in targeted companies, it may still begin to shape public opinion. A clear message is being sent to the fossil fuel companies. While it is true that we will still require fossil fuels in the immediate future, there can be a movement toward using natural gas a ‘bridge fuel’ rather than the more damaging coal. There will be a change in economy when we transition to sustainable energy, but this is necessary and will be to our benefit in the long run. It can be most successful when supported by a large number of companies and individuals. We know that money talks…..so maybe this is something that we can do which will be heard.
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