Why Divestment?

Climate change is not an abstract future threat to humanity; the impacts are here and they’re going to get much worse. The severity and frequency of extreme weather events are a product of humans burning of fossil fuels and greenhouse gas emissions. If we want to do anything to adapt to and mitigate the impacts of climate change, we need sweeping legislation, bold restrictions on fossil fuel companies, and an active fight against their influence on our democracy.

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In order to avoid catastrophic climate change, at least 80% of all known fossil fuels have to stay in the ground. This fact means that corporations are doing everything in their power to extract and burn as much coal oil and gas as they can before our laws catch up to their reckless practices. So long as they have power, they will use it to stop our government from passing the common-sense climate legislation that we desperately need. Two-thirds of all greenhouse gases ever emitted were emitted by just ninety corporations. Meanwhile, the people who are being hit first and worst by climate impacts and environmental destruction are poor people, people of color, and people in developing nations. The generations of greedy CEOs and industry lobbyists responsible for unfettered pollution and the vast majority of greenhouse gas emissions will suffer the least from the impacts of climate change. Climate change is a symptom of the greed and unchecked corporate power of the fossil fuel industrial complex. If the fossil fuel industry’s business model succeeds, people die.

If we are to communicate to the fossil fuel industry, to CEOs, and to the politicians they own that we won’t stand for their destructive business model, we have to impact their bottom line. We have to speak with our money and our influence. It is not acceptable that 1% of the population owns the vast majority of wealth in this country. It is not acceptable that wealth allows some people to own politicians and virtually run our government. It is not acceptable that the richest and most powerful people in the United States work together in coalitions to maintain the status quo, to ensure that the rich get richer and the poor get poorer. That is why we must build a grassroots movement to divest from fossil fuels and challenge corporate power.

Read on to learn more about what fossil fuel divestment is and what the arguments are.


What is fossil fuel divestment?

Fossil fuel divestment refers to phasing out investments in fossil fuel companies, namely, coal, oil and gas companies. Most of those who have divested specifically choose to divest from the 200 largest publicly traded fossil fuel companies with the largest carbon reserves (coal, oil, and gas), as listed in the Carbon Tracker 200.

Institutions are choosing to divest for both moral and financial reasons.

The moral argument is based on the belief that if it is wrong to wreck the planet, it is wrong to profit from the wreckage of the planet. And the people who will suffer first and suffer the most from climate change—the global south, low-income communities, communities of color, and other vulnerable populations—by and large have not contributed much to nor benefited as much from the pollution-based economy. Meanwhile, the largest extractors of fossil fuels in the world, such as ExxonMobil, Chevron, BP, and Shell, have not used their profits to invest in a just and gradual transition off fossil fuels toward renewable energy like sun and wind. Instead, they have used their wealth to fund and distribute junk science aimed at sowing doubt about the scientific consensus (which represents 97% of climate scientists) around climate change and to deliberately block, slow, and weaken policy advances through Congress, global treaties, and state legislatures. Divesting sends a message that such behavior is disreputable and not welcome in the mainstreams of society, and helps motivate climate action in government.

The financial case for divestment argues that we are experiencing a “carbon bubble,” or an over-valuation of fossil fuel industry stocks in the world’s stock markets. The profit model of companies that hold fossil fuel reserves relies on the assumption that society will continue to use and exploit these resources in current or greater numbers for perpetuity. Every barrel that ExxonMobil sells must be replaced with a new barrel that they discover, or else their stock market value will decline. In a world with limited stockpiles of fossil fuels that must transition to renewable energy to hold climate change in check, this model no longer makes sense. Indeed, researchers have run the numbers, and current estimates suggest that society can only afford to burn approximately 20% of existing proven reserves of fossil fuels (that companies or petro-states already count on their balance sheets and intend to exploit) if we are to keep global temperatures at levels consistent with the conditions necessary to sustain human life and civilization. That means that up to 80% of those reserves must remain in the ground, and thus approximately 80% of the stock market value of fossil fuel companies will prove to be worthless once the market catches up with this realization.

Who has already divested?

Nearly 900 institutions and governmental bodies that have taken a leadership role on this issue and protected their investments against the carbon bubble by divesting their portfolios, partially or fully, from fossil fuels. The total value of all divested portfolios exceeds $6 trillion. While the scope and manner of divestment vary—some institutions have divested only from coal and tar sands, the most polluting fossil fuels; some institutions have divested only their direct holdings in fossil fuel stocks; some institutions have undertaken full divestment from all fossil fuels in all asset classes—all of these institutions have begun to better align their investments with their values and to protect their investments against the inevitable shock of the bursting of the fossil fuel bubble. More and more investment firms and portfolio advisors are offering fossil-free investment options, which means that divestment is becoming easier and easier for institutions to accomplish.

The commitments from these and hundreds of other institutions and their fiduciaries clearly demonstrate that divestment is a legitimate strategy that should be considered by any institution that sees itself serving a moral purpose and cares about long-term returns. Divestment from fossil fuels is wholly possible without harm to financial returns and is only going to become simpler as more and more institutions join the growing list of divested funds and the effects of climate change become more pronounced.


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