Royal institutions divest from fossil fuels, encourage others to follow suit

The RSA and RCEM hope their commitments will inspire broader action

The divestment move has seen RCEM offload all fossil fuel investments from its £1.3m portfolio and the Royal Society of Arts remove all oil and gas related shares from its £17m fund.

In announcing the move, the two organisations are urging more local authorities, universities, religious and cultural institutions to follow suit.

They note that the likes of Southwark Council, SOAS, United Reform Church and The Church of England have already made significant divestment moves, amid rising public concerns around issues such as climate change and air pollution. This trend has proven particularly pronounced in the healthcare sector, where organisations have globally and collectively divested £247m from fossil fuel assets to date.

The Royal Society of Arts’ senior researcher Josie Warden said the organisation already had “very limited exposure” to fossil fuel firms in its portfolio, but hopes its decision will spur wider action.

Warden said: “Engagement remains an invaluable tool for investors in promoting positive social, environmental and governance activities within firms, across a host of issues from modern slavery to mental health.

“However, the energy transition we need requires that we halt exploration, extraction and reduce the supply of fossil fuels and instead focus on sustainable energy solutions. Making financial flows consistent with this ambition is critical and the Royal Society of Arts believes that to achieve this, the time has come to divest holdings in fossil fuel firms.”

On a global level, the UN’s Principles for Responsible Investment (PRI) arm has estimated that $485bn will need to be invested in renewables annually through to 2030 if the aims of the Paris Agreement are to be met. At present, funding levels are falling around $208bn short each year. 

Growing trend

Moves to divest from fossil fuels have become increasingly common in recent years, amid increased climate pressure from investors, policymakers and the general public.

Climate action group Unfriend Coal revealed in its latest report that 24 of the world’s largest investors have collectively excluded coal from $6trn in assets, as the trend towards divestment from carbon-heavy projects and products continues.

More specifically, the likes of Legal and General Investment Management (LGIM), Lloyds of London, Aviva, Allianz, Axa, Legal & General, SCOR, Swiss Re and Zurich have now all begun their divestment process. 

This trend is also beginning to take hold outside of the finance sector. This week saw the National Trust commit to divest entirely from fossil fuel companies within the next three years. It currently holds £40m invested in this space – an amount which represents 4% of its total £1bn+ portfolio of stock market investments.

Sarah George

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