How should you convince people to support your campaign? Here are some important facts, figures and arguments to help make the case.
Without bold action to keep 80% of fossil fuels in the ground, a changing climate will have devastating consequences for people, societies and ecosystems around the world. Sufficient action presents an existential challenge to the business model of the fossil fuel industry, and until we overcome the power and might of their lobby, the necessary action is being stalled.
Divestment let’s us challenge the might of the fossil fuel industry and show widespread support for action on climate change. It allows us to unpack the myth that fossil fuels equal prosperity, and through positive reinvestment we can talk about the future we want to see, and start getting support behind it.
There are strong moral and financial reasons for organisations to divest from fossil fuels. Divestment is an opportunity for organisations to align their investments with their values and show leadership on climate action.
A growing body of evidence suggests that it is fossil fuel investments that are increasingly risky, and that many fossil free portfolios are outperforming their conventional counterparts. Key arguments and resource to use relating to this are here.
Once the decision has been made, it’s often just a case of instructing the financial officer or external asset manager to apply exclusion classes.
Here’s some resources to help:
Remember: here’s the Fossil Free Divestment Ask.
Shareholder engagement has been a crucial tactic at creating change in all sorts of areas from the living wage to curbing executive pay, but there are some reasons why we think divestment may be a more powerful option in the case of fossil fuels:
The vast sums of money going into political lobbying and further extraction and stated commitment to burning all of their reserves shows the fossil fuel industry is not willing to change their stripes.
A recent United Nations report on emissions disclosure from the ‘Principles for a Responsible Investment Academic Network’ further confirmed “pressure from the state, NGOs and the public impact a corporation’s decision to report GHG emissions data, but pressure from equity investors and debt lenders does not.”
Further resources making the case against engagement:
Hurrah – that’s a great start and make sure to celebrate this victory. Tar sands and coal are some of the dirtiest fossil fuels. 99% of tar sands need to be kept underground to meet the 2 degrees target, and coal is generally seen to be in the way out.
Even if we abandoned coal and tar sands completely however, that wouldn’t be enough to stop runaway climate change and institutions need to be pushed further.
Fiduciary responsibility, or fiduciary duty, is a legal term meaning that trustees must act in the best interest of the ‘fiduciary’ or ‘fiduciaries’ – which could be an institution like a university, or individual pension holders for a pension board trustee.
In many cases, this duty is interpreted to mean maximising short term returns at the expense of all other factors. As such, many administrators justify a policy of continuing to invest in fossil fuels by stating that any other course of action would be breaking their legal responsibility.
Growing concern that this current interpretation tends to overemphasise short-term performance while neglecting longer-term risks prompted the 2012 Kay Review into Equity Markets and Long-term Decision and 2014 UK Law Commission Report to support a broader interpretation of fiduciary duty – suggesting that socially and environmentally responsible approaches to investment are, at the least, consistent with this duty, and that institutional investors acting in their clients’ best interests should consider the environmental and social impacts of their investments.
As this ruling is relatively new, decision makers should be pointed towards this summary of the Law Commission ruling.
The UK Government has agreed to implement the recommendations of the Law Commission:
UN climate chief Christiana Figueres said “Investment decisions need to reflect the clear scientific evidence, and fiduciary responsibility needs to grasp the intergenerational reality: namely that unchecked climate change has the potential to impact and eventually devastate the lives, livelihoods and savings of many, now and well into the future,” she added bankers would be “blatantly in breach of their fiduciary duty” if they failed to accelerate the greening of their portfolios.
Top tip for Local Government Campaigners:
In March 2014 the Local Government Association (LGA) (England & Wales) published a legal opinion on how fiduciary duties affected the scope for a Local Government Pension Scheme (LGPS) fund to incorporate ESG risks into their decision making, concluding that as long as authority’s powers are used only for investment purposes “the precise choice of investment may be influenced by wider social, ethical or environmental considerations, so long as that that does not risk material financial detriment to the fund.”
Most institutions will use external asset managers and consultants to manage their money on a day to day basis (and pay an enormous amount for the pleasure). Some key things to note are:
This argument has been put forward by a number of institutions, including Harvard, that are unwilling to divest. But now the debate is public, investments are political if you like it or not – you’re either with the fossil fuel industry or you’re not!
Divestment is about political rather than financial power, so if the ditched shares are bought up by some faceless investor, it doesn’t really matter. The point is that a public institution has stood up to the fossil fuel industry and set out its stall for climate action, and the fossil fuel industry can’t undo that reputational hit very easily.
Oxford University Smith School ‘Stranded Assets’ Report:
‘The outcome of the stigmatisation process, which the fossil fuel divestment campaign has now triggered, poses the most far-reaching threat to fossil fuel companies and the vast energy value chain’.
Divestment movements have been incredibly powerful in the past, and there’s more information about ours here.
Where the institution chooses to ‘reinvest’ may be determined by both its mission, and its current investment strategy and asset allocation criteria. There are some examples of local reinvestment here, and it’s worth looking around for local options to suggest (without giving financial advice).
While the options for reinvestment have sometimes seemed limited, especially for larger investors, it’s important to note that:
Resources from the US: