While investment means buying stocks, bonds or other investments in order to generate financial returns, divestment is getting rid of particular stocks, bonds or investment funds. This could be for financial reasons, ethical reasons, or some combination of the two.
Fossil fuel divestment, therefore, is avoiding direct ownership of, or commingled funds that include, public equities and corporate bonds of fossil fuel companies.
Additionally, you could also consider reinvestment asks – these consider how money currently invested in fossil fuels could be reinvested into clean energy, local infrastructure or other public goods. To find out more about reinvestment, check out the Reinvesting Pensions report from Community Reinvest.
As money in local government is held at different levels and the exact set-up varies across the UK, a commitment to go ‘fossil free’ may look different in different places, and campaigners will need to determine their own local approaches to fossil-free government accordingly.
While the majority of money is held in local government pension funds, some campaign groups have started with lower levels of government (that don’t control the pension fund) where the decision to go ‘fossil free’ is more straight forward. These smaller wins have helped to build momentum and get institutional support for approaching the pension fund (see Oxford’s case study).
Remember, it’s the public commitments – from our towns, our cities, our counties – to distance themselves from the practises of the fossil fuel industry and undermine their social and political license to operate that’s especially important.
1. Immediately freeze any new investment in the top 200 publicly-traded fossil fuel companies.
2. Divest from direct ownership and any commingled funds that include fossil fuel public equities and corporate bonds within 5 years.
These top 200 publicly-traded fossil fuel companies (identified by Fossil Free Indexes Carbon Underground 200 project) represent a large volume of fossil fuel reserves and have been useful for setting asset exclusion criteria.
5 years has been identified in consultation with the industry as a practical and financially prudent deadline to work to.
Additional demands could be included around local or sustainable reinvestment as appropriate.
Cash reserves aren’t conventional ‘investments’; they are much smaller than pension funds, and there are limitations to completely leaving the biggest banks. However there are a couple of campaign options.
You can ask your local government to contact the providers holding their cash reserves (likely the biggest five banks) to ask about their exposure to fossil fuels and plans to reduce this, and moving some investments to alternative banks and building societies (including Nationwide, Coventry Building Society, Triodos, Unity Trust Bank, The Cooperative, CCLA’s Public Sector Deposit Fund, or Metro Bank).
Move Your Money published a local authority guide to banking for social good in 2013 which contains further information on local government bank investments and financial policy, with further resources around divestment and fossil free options on their website.
Leicestershire Council chose to divest its treasury investments from Barclays in July 2012 following the LIBOR scandal for example.
If you’re directly targeting a pension fund in your campaign (or institution controlling a pension fund) then the primary ask should be in line with the global divestment demands (listed above).
The primary ask to your target should always be full divestment from all fossil fuels, however, it’s also a good idea to have some ‘bargaining positions’ – should the fund not be willing to commit.
These are some options for ‘intermediate’ asks to the pension fund. For more information or advice on any of these, get in touch.
If your target doesn’t control a pension fund (e.g. a city council), there are still divestment demands you can make. The main way of doing this will be passing a divestment motion through full council.