Since its launch by students as a call to climate action in 2011, the fossil fuel divestment campaign has become a mainstream financial movement mobilizing trillions of dollars in support for the clean energy transition. Commitments to divest continue to grow rapidly: Today, more than 985 institutional investors with over $6.24 trillion in assets have committed to divest from fossil fuels, up from $52 billion 4 years ago—an increase of 120x. Many more institutions are divesting quietly, moving their money out of an industry increasingly beset by financial and regulatory challenges. 

Insurers, pension funds and sovereign wealth funds are are the primary actors that account for the growth in committed assets in 2018. The insurance sector continues to lead the trend of divestment, with over $3 trillion in assets committed. Sovereign wealth funds and pension funds are also moving: Ireland, which has a €8.9 billion sovereign development fund, became the first country to commit to divest its wealth fund from fossil fuels this year. New York with its $181 billions pension funds and London are also among the new commitments this year.

Mission-driven institutions continue to divest in large numbers, too, with significant new commitments from the health, faith, foundation and university sectors. Divestment commitments from health care institutions are growing, as doctors become increasingly concerned about the public health impacts of climate and the need to align their investments with their mission. In addition, faith-based organizations are divesting in higher numbers, with an additional 134 institutions committing since 2016.

While divestment was once viewed as an alternative to shareholder engagement, it is now increasingly used as part of a joint strategy to pressure the fossil fuel industry. Almost universally, the largest oil and gas companies are not planning on a world consistent with the Paris Agreement goal to temperature rise well-below 2°C, suggesting the limitations of shareholder engagement to change the fossil fuel industry. The new convergence of engage and divest strategies are increasing pressure on the industry.

Institutional investors are increasingly marrying divestment to commitments to invest in climate solutions, reallocating their funds to growth industries in renewable energy, clean tech, energy efficiency, and energy access. Global insurers and cities are leading this trend. The movement has achieved such growth and success because of the intersection of ethical, financial and fiduciary duty imperatives to divest.

Mission-driven institutions, climate advocates, and youth activists that first led the movement to divest continue to advance a strong moral call to action responding to the urgency of the climate crisis. Grassroots resistance and mobilizations against fossil fuel projects and pipelines have spread globally and are increasing. A new student movement is demanding that politicians refuse to take money from the fossil fuel industry.

Divestment is now being driven by a growing number of institutions who are using it to manage climate and reputational risk, insulate their assets from growing financial stress in the oil and gas industry, and to align with the UN Paris Climate Agreement. Regulators, including the G20’s Task Force on Climate-Related Financial Risk, are now explicit that climate change and the threat of stranded fossil fuel assets pose a material risk to investor value now. In addition, climate litigation is increasing the pressure on fiduciaries to divest, as fossil fuel companies – and fiduciaries themselves – face legal liability and damages in jurisdictions globally.  

This growing support for divestment and the broader movement to keep fossil fuels in the ground is now having a material impact on the fossil fuel industry, limiting the industry’s access to capital and insurance, and increasingly cited by fossil fuel companies themselves as a material threat to their business. Over the past year, divestment pressure and related “keep it in the ground” campaigns have inspired a number of high-profile decisions by major banks to stop financing for new fossil fuel projects, including a commitment from the World Bank to stop funding oil and gas development. In addition, several major insurers have decided to stop underwriting fossil fuel projects. While not divestment per se, these actions materially and negatively impact the industry by increasing costs of capital and compliance. These actions also directly reduce fossil fuel emissions by slowing the expansion of the industry.

Now is the time to set another ambitions target: $10 trillion divested assets by 2020. Investors should commit to at least 5% of their portfolios to climate solutions to help rapidly scale to 100% renewable energy and universal energy access. For those investors who persist in engaging with the fossil fuel industry, we ask them to set 2020 as the time limit for engagement. If companies or will not produce 2 degrees transition plan by then, investors must divest of they will own climate change and its impacts.