As the discourse around climate risk, the ‘carbon bubble,’ and ‘stranded assets’ moves into the mainstream of finance, coupled with the competitive returns of fossil free investing, campaigners have a robust set of resources to dismantle informational barriers like fiduciary duty and the cost of divestment. This infographic lays out the key arguments. For detailed information on financial arguments, check out the sections below.
Key arguments against shareholder engagement:
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The problem with investment consultants? In many cases, ultimate fiduciary responsibility for the performance of the assets rests with trustees who are non-specialists and require independent and specialist advice. This is where consultants come in. In addition to financial expertise, consultants have ‘political value’ when considering fiduciary duty. Investment consultants provide a shield which institutional investors can use to defend their stock selection or deflect divestment pressure. Key terms:
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To calculate the question of risk and return, analysts examine historical data and test divestment on the past performance of the market – what would have happened if you had divested years ago, so to speak. Here’s what the research says:
This is good defense, but what about offense?
It’s smart not to try to sell divestment as a way to outperform a current investment strategy (even if you may be right). It often comes off as speculation from an unofficial source. With that being said, you can talk about reducing the “risk exposure” of a portfolio by divesting. Sell trustees on being more conservative by divesting than not divesting. Trustees are always looking for ways to reduce “risk.” For more information about carbon risk to your portfolio see the Stranded Assets page. And remember, institutional investors have long timeframes to consider. Do you think fossil fuels are a good long term bet? Key terms
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Key arguments
Key terms
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For guidance on deploying these arguments with decision-makers, check out this handy guide to common misconceptions about divestment. To find out how much money your target institution has lost by investing in fossil fuels over the last three years, check out The Decarbonizer, a free online tool for campaigners! ← back to divestment arguments