Jamie Arbib in the Guardian: “Today marks an important milestone in the emergence of a growing and increasingly significant movement to withdraw investments from fossil fuels and reinvest them into clean energy. Ahead of the UN Climate Summit, it has been announced that organisations and individuals controlling investments of more than £30bn have committed to divesting their dirty energy investments, seven of which – controlling £250m of assets – are from the UK.”
“It was only three years ago that the Divest-Invest movement was founded: it’s goal to encourage institutions, foundations, charities, wealthy individuals – in fact anyone with investments – to commit to taking them out of industries that promote fossil fuels and into the clean energy sector. Three years on and almost 170 foundations and 600 wealthy philanthropists controlling a staggering £30bn of finance have pledged to do just that, and while this might, in the context of the global financial markets, be a drop in the ocean, it is an encouraging start. Like any other sector, the clean energy sector depends increasingly on funding from the capital markets. The more we invest in them the quicker the technology like solar, wind and tidal power will become part of our everyday lives.
But this movement is not driven by sentiment; it’s driven by long-term economic reality. Titans like Exxon Mobil have been underperforming the S&P 500 over the past five years, causing savvy investors to look beyond traditional powerhouses for opportunities. It’s becoming clear that the planet only has sufficient fossil fuels to power our houses and power stations for a very limited period.
These declines aren’t the result of a crackdown in climate policy, they are the result of market forces. Coal is declining because of the surge in cheap and abundant gas, while cheap oil is harder to come by, leading excavators to tap exotic and sensitive reserves, such as remote deposits in Arctic waters. Gas itself is notably volatile, and many industrial users are opting to lock-in stable renewable energy in a 20-year power purchase agreement, rather than risk gas’s mercurial highs and lows.
Meanwhile, non-fossil energy is roaring down its cost curves: the price of solar panels, for example, has dropped 70% over the past five years. This isn’t environmentalism, it’s the free market, and the results are impressive. On some days Germany gets over half its power from the sun and wind. Soon it will be drawing 30% daily as a matter of course.
The conventional wisdom was that we should pursue maximum returns through a realpolitik investment strategy, even if that meant investing in climate change. But new realisations have helped us turn conventional wisdom on its head: it is a fact that the world is getting hotter because we keep putting heat-trapping gases like carbon dioxide into the air when we burn fuel for electricity. Every year we burn coal, oil and gas, we add another blanket to the planet.
The upshot is that we have a set carbon budget. If we bust this budget, there’s no line of credit to back us up, no extra planet to go home to. At least five major studies over the past 18 months – most recently PricewaterhouseCooper’s 2014 Annual Report – stress that we are dangerously close to busting our carbon budget. Yet companies such as Shell and BP are together spending close to a trillion dollars in looking for additional reserves to exploit.
We don’t accept this logic, and nor do other members of the coalition of fossil free investors we are proud to join this September 22 in New York City. High net-worth individuals, such as Ben Cohen of Ben & Jerry’s Foundation; cities, such as Oakland in California; academic institutions, such as Stanford University; faith groups, such as the Quakers; health care systems, such as the British Medical Association; and pension funds, such as Darwin Superannuation Fund, are divesting their portfolios of the top 200 coal, oil and gas producers. They are getting out while the getting is good, and seeding the clean energy future while they are at it.
Of course, divestment is not the only option, but there is a need for holders of investments to act like owners and take responsibility for the impact of their investments. At the very least they must engage with the issues to ensure that the risk of assets being stranded – where they suffer from unanticipated or premature write-downs, devaluations or conversion to liabilities – is considered and action is taken by companies, organisations and individuals to avoid this risk.
It is no surprise that the fossil-free movement is the fastest growing divestment movement in history: the financial and moral imperatives to divest from the past and invest in the future have never been so seamlessly paired. We hope the heads of state gathering this week at the UN Climate Summit will take a lead also. I’m proud that UK foundations are taking up the challenge, but more needs to be done to show the world that we can be leaders on the global stage when it comes to a green future.”
Future Today
