Fossil fuel divestment funds double to $5tn in a year
The value of investment funds committed to selling off fossil fuel assets has jumped to $5.2tn, doubling in just over a year.
The new total, published on Monday, was welcomed by the UN secretary general, Ban Ki-moon, who said: “It’s clear the transition to a clean energy future is inevitable, beneficial and well underway, and that investors have a key role to play.”
The fossil fuel divestment campaign began on university campuses in 2011 but the new report reveals that concerns over investments in coal, oil and gas have now entered the financial mainstream, with more than 80% of the funds now committed to divest being managed by commercial investment and pension funds.
The report found that 688 institutions and more than 58,000 individuals across 76 countries are now committed to divestment, including major financial institutions such as the world’s biggest sovereign wealth fund, owned by Norway, and Allianz and Aegon.
“I commend today’s announcement that a growing number of investors are backing a shift away from the most carbon-intensive energy sources and into safe, sustainable energy,” said Ban. “Investments in clean energy are the right thing to do and the smart way to build prosperity for all, while protecting our planet.”
“$5tn in five years is a stunning and unprecedented figure,” said Ellen Dorsey, at the philanthropic Wallace Global Fund, one of the earliest backers of the fossil fuel divestment movement. “It represents a growth the fossil fuel industry would envy.”
Lou Allstadt, a former senior executive at Mobil Oil, said: “Divestment is speeding up the clock on the final accounting that will show fossil fuels are out and clean energy is in.”
Scientists have shown that most existing fossil fuel reserves cannot be burnedwithout causing dangerous climate change. Campaigners argue this makes fossil fuel companies – which are spending billions exploring for even more coal, oil and gas – bad investments on both moral and financial grounds.
If the world’s governments fulfil their pledges to tackle climate change by cutting carbon emissions, many fossil fuel reserves would have to be kept in the ground, potentially wasting trillions of investors’ money. This risk is now being taken seriously at the highest level, including the Bank of England, World Bank and the G20’s financial stability board.
The new report, produced by Arabella investment advisors for the DivestInvest coalition, collated public pledges to sell off some or all fossil fuel investments and added up the overall investments managed by those institutions. The total was double the $2.6tn reported by the last analysis in September 2015.
It is often difficult to calculate the precise proportion of fossil fuel investments in complex funds, but about $400bn of the $5.2tn total is likely to be in coal, oil and gas. Asset managers controlling $1.3tn – a quarter of the total – have also committed to increasing their investments in clean energy to accelerate a transition to the low-carbon economy.
“As the hottest year in history comes to a close, the success of the global fossil fuel divestment movement is undeniable,” said May Boeve, executive director of 350.org, the grassroots climate organisation that has played a leading role in the campaign. “Divestment has permeated every sector of society: from universities and pension funds, to philanthropic and cultural institutions, to cities, faith groups, insurance companies and more.”
Fossil fuel divestment has been criticised as gesture politics, as the investments are sold on, or unrealistic due to world’s current dependence on fossil fuels. Bill Gates called fossil fuel divestment a “false solution” in 2015, although the $40bn Bill and Melinda Gates Foundation has now sold off 85% of its fossil fuel investments.
Saudi Arabia’s oil minister, Ali Al-Naimi, also criticised divestment as “misguided” but said it could not be ignored, while Bill McNabb, chief executive of the investment giant Vanguard, said divestment had no impact on company balance sheets and threw away the opportunity to influence the company as a share owner.
However, campaigners said divestment stigmatised companies and is having a real world impact on what has been an enormously powerful industry. “We are weakening the fossil fuel industry politically, socially and financially,” said Dorsey.
Mark Campanale, executive director of the Carbon Tracker Initiative, a thinktank that analyses the financial risks of fossil fuel investments, said: “The financial markets are fast losing faith in the investment case for fossil fuels. A technological revolution is underway in the energy and transportation sectors [and] financial market regulators stand ready to move from rhetoric to tough action on climate risk management.”
Archbishop Desmond Tutu, one of the most revered figures of South Africa’s anti-apartheid struggle and a key backer of the divestment campaign that helped end the system, was an early backer of fossil fuel divestment and said in 2014: “People of conscience need to break their ties with corporations financing the injustice of climate change.”
Tutu, a Nobel peace prize-winner, joined with other Nobel laureates this week to demand that the $350m Nobel foundation fund divest from fossil fuels.
A campaign by the Guardian has called on the Gates foundation and the Wellcome Trust, the world’s largest medical research charity, to divest their large endowments of fossil fuels. The Guardian itself committed to divest from fossil fuels in April 2015.