American environmentalist and journalist, Bill McKibben, offers a simple yet revolutionary proposition in the climate debate: “Leave oil in the soil, coal in the hole and gas under the grass”.
The birth of an idea
Divestment is a very simple idea. You just remove your money from companies that are involved in extracting fossil fuels. It’s a novel movement in the climate debate that is different from your traditional change-your-lightbulb kind of ideas.
Its underlying basis is that to avoid catastrophic global warming, we will need to reduce our carbon dioxide emissions. There are three key numbers that explain this. First, 2˚C is the maximum global temperature rise this century that is aspired to in the Paris Agreement. Secondly, we have a ‘carbon budget’ of 565 gigatons which is essentially the amount of carbon dioxide that can safely be released into the atmosphere while still complying to our 2˚C rule. Most importantly, the third number to know is 2795 gigatons. This is the amount of carbon dioxide that will be released if all of the documented fossil fuel reserves were burned.
Addressing a sixfold rise in energy demand in the last 50 years, fossil fuels provide roughly 80% of the energy we need through coal, gas and oil. Yet, the money-making industry releases greenhouse gases into the atmosphere and thickens Earth’s blanket of air pollution which led to 3.7 million deaths in 2012 due to pneumonia, asthma, heart disease, stroke and cancer. Needless to say, carbon dioxide is a tiny molecule with a big bite.
So, while as individuals we could make some adjustments such as changing our lightbulbs and switching from car use to public transport, if companies continue to dig up and burn their reserves, these measures will prove This is where divestment comes in – a movement about shifting your money away from the problem and towards the solution.
Turning back time
In history, divestment has been shown to be a powerful political tool in several major movements.
In the latter half of the 20th century, a time when South Africa’s Apartheid was our world’s largest moral issue, two prominent figures created massive change. Nelson Mandela and Desmond Tutu suggested a revolutionary tactic to help counter institutionalised racial segregation and white supremacy, imploring Western institutions to cut their economic ties with companies backing the Apartheid regime. Experts often deem this as the model of symbolic pressure as it raised awareness and embarrassed many American businesses.
Then, through the 1990s, a movement against the tobacco industry took place to shun the industry’s negative impacts on health. Along with regulation and taxation, tobacco divestment had a sizeable impact on society, shrinking the industry and smoking rates.
Most recently, divestment has had a role in the Darfur genocide – the first genocide of the 21st century. Darfur divestment involves removing money away from companies with ties to the Sudanese government. Some Western institutions including Brown University divested; however, other investors interested in the nation’s valuable resources simply filled their place. Drawing from this rather unsuccessful campaign, fossil free activists are encouraged to consider how their actions could lead to the success or failure of the divestment movement. More specifically, it is important to weigh the impact of divesting from a company relative to giving up your voice as a shareholder.
Fuelling a movement
Nevertheless, the balance scales show that divestment is well worth the bet. Major goals of the fossil fuel divestment campaign can be captured in the following:
- leverage the power of investors and institutions to make strong political statements and influence policy change
- raise awareness of the impact of the fossil fuel industry in our society
- lead the market to consider the effects of climate change when evaluating any investments
- drive capital investment into clean energy and other climate mitigation strategies
Above all else, divestment stigmatises the fossil fuel industry, eroding its social license to operate and posing the largest threat to these companies.
And, if you have not figured it out yet, the fossil fuel divestment campaign is not a normal movement. There are no great leaders. There is no Gandhi or Martin Luther King Jr. of the climate movement. But, establishing firm roots in society, the fossil fuel movement is set to be colossal with or without a figurehead.
Since its initial conception in 2010, the idea of fossil fuel divestment has been spreading like wildfire. The campaign celebrated its first major victory in mid-2014 when Stanford University committed to divesting its US$18.7 billion endowment from the industry. Later that year, the campaign inspired the People’s Climate March where a 400,000-strong crowd flooded Manhattan’s streets, demanding U.N. action on global warming. By 2015, around 2500 investors representing US$2.6 trillion in assets had divested, including major organisations such as the Rockefeller Brothers Fund and the Canadian Medical Association.
Back home, Australian universities are making bold statements with the help of several fossil free organisations on campus. La Trobe University, Swinburne University and the Queensland University of Technology pledged to divest their A$40 million, A$150 million and A$300 million portfolios from fossil fuels respectively. Recently, both Monash University and the Australian National University have partially divested. But sadly, Westpac, ANZ, NAB and the Commonwealth Bank – which make up the ‘big four’ banks of Australia — have failed to divest, instead funding the industry to the tune of A$5.5 billion in 2015.
Pop goes the bubble
From an economic point of view, fossil fuel divestment is falsely thought to come with financial uncertainty and major repercussions. Addressing this, a key argument in the fossil fuel divestment campaign is that returns will, in fact, improve once investors have divested – an argument based on a concept called the ‘carbon bubble’ – named by the Carbon Tracker Initiative. Much like the US housing bubble of 2009, the ‘carbon bubble’ has its underlying roots in the fact that our financial markets The problem here is that all reserves simply cannot be burned if we intend to comply with the ‘carbon budget’, or else, there’s no doubt that we will find ourselves amidst catastrophic climate change.
More importantly, with increasing pressure from pollution regulations, competition from renewables and one of history’s fastest growing stigmatisation campaigns, the value of fossil fuels is already diminishing.[4,8] Last year, energy use emissions grew less than 1% for the third consecutive year. Oxford University researchers and commercial analysts are predicting that fossil fuels are likely to become ‘stranded assets’ which cannot be used, rendering them worthless to investors.[8, 9] It follows that investors should prepare for such a scenario by selling their assets now rather than after the ‘carbon bubble’ bursts when investors are likely to lose money.
Preparing accordingly, investors in Wall Street banks, such as HSBC and Chase, have demanded that fossil fuel companies discuss the risks of the bubble; while, oil companies, including Shell, are now committed to disclosing their asset portfolios and discussing the bubble. Similarly, with major financial news venues such as Bloomberg and the Financial Times now backing the movement, we are beginning to achieve one of our primary aims: influencing the economy’s thinking on climate change. In fact, as of September 2017, US$5.53 trillion has been divested by almost 800 institutions.
Renewable energy: a brave new world of investment
So, you move your money away from the fossil fuel industry and then what? Many experts have shown that investing in ethical funds such as the renewable energy industry will have financial returns similar to, if not better than, the fossil fuel industry.
Renewable energy has made ambitious headlines around the world. For instance, China recently became home to the world’s largest solar farm at 27-square-kilometres which can produce 850 mega-watts of power – enough to supply around 200,000 households. However, even though renewable technology needs to be used by all, it’s only accessible to those who can afford it. Addressing this gap, many grassroots movements are committed to providing renewable energy to developing nations. For instance, one such foundation, Liter of Light, teaches communities to recycle plastic bottles and use locally sourced materials with the aim of illuminating their homes – a strategy which has received much recognition and is often adopted for use in UNHCR camps.
The power of smaller players
Speaking of smaller players making big waves, medical societies and faculties, are major targets of the fossil fuel divestment campaign. As highly regarded entities within universities, they are large enough to matter but small enough to have an influence on. Now, more than ever, we are seeing Australian medical university groups divesting (Figure 1). Most recently, the University of Newcastle’s global health group, Wake Up!, switched from the Commonwealth Bank to Newcastle Permanent – a major win in our medical scene (Figure 2). Although divestment will not cripple the fossil fuel industry overnight, this strategy can still operate effectively, conveying a loud and clear message of disapproval – an objective we are closer to achieving thanks to societies like Wake Up!
One of divestment’s main jobs is to draw attention and challenge the status quo – a powerful opportunity to be noticed, and be remembered, in times of tragedy and turbulence. It’s a movement that inspires students, banks and universities alike to make ethical commitments and invest in a sustainable future. With global warming looming large, now is the time to blaze trails and boldly transform the climate debate.
- Fossil fuel divestment is a very simple idea: a global movement focussed on shifting money away from a problem and towards a solution.
- Divestment has been shown to be historically successful
- Establishing firm and expansive roots in our society, divestment now sets out to radically influence the world’s thinking on climate change
Tara Kannan is a first-year MD student at the University of Newcastle. Passionate about global health, she represents AMSA’s 2017 Code Green portfolio within her university’s global heath group. She believes that a major way forward in advancing medicine on the world stage is through nursing our environment back to good health. Aside from that, when she’s not busy dissecting Guyton’s diagrams, she enjoys perusing news articles online and loves her Cadbury.
Conflicts of interest
1. United Nations Framework Convention on Climate Change: Adoption of the Paris Agreement. 21st Conference of the Parties, 2015: Paris, France: United Nations.
2. 350.org. Do the Math [Internet]. Math.350.org. 2017 [cited 15 September 2017]. Available from: http://math.350.org/
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5. Carroll R. Major University Divests $18 Billion Endowment From Coal Companies [Internet]. HuffPost. 2017 [cited 15 September 2017]. Available from: http://www.huffingtonpost.com/2014/05/07/stanford-university-divesting_n_5276899.html
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9. Brahic C. Living with climate change: Have we reached peak emissions? New Scientist. 2017; 234: 32-4.
10. De George R. Ethics, corruption, and doing business in Asia. Asia Pacific Journal of Economics and Business. 1997; 1: 39ñ52.
11. Phillips T. China builds worldís biggest solar farm in journey to become green superpower #GlobalWarning [Internet]. The Guardian. 2017 [cited 15 September 2017]. Available from: https://www.theguardian.com/environment/2017/jan/19/china-builds-worlds-biggest-solar-farm-in-journey-to-become-green-superpower
12. Liter of Light. Liter of Light – About Us [Internet]. Liter of Light. 2017 [cited 15 September 2017]. Available from: http://literoflight.org/about-us/