What is Divestment?
According to the Oxford Research Encyclopedia, “divestment is a socially responsible investing tactic to remove assets from a sector or industry based on moral objections to its business practices.” It has historical antecedents in the anti-apartheid movement in South Africa. The early-21st-century fossil fuel divestment movement began with climate activist and 350.org co-founder Bill McKibben.
The aggregation of individual divestment campaigns comprises a movement with shared goals. Divestment functions as a “tactic” to indirectly apply pressure to corporate power structures involved in profiting off of environmentally destructive practices or other immoral actions. Boycotts, divestment and sanctions are being deployed to seek climate, social, or animal welfare justice in many different types of campaigns, such as the BDS Movement, Starbucks Boycott (video), Boycott Fortune 500 Movement, Boycott NRA Companies, Circus Boycott and many more.
How Does Divestment Work?
Oxford Research Encyclopedia explains that “divestment campaigns seek to stigmatize the fossil fuel industry. The rationale for divestment rests on the idea that fossil fuel companies are financially valued based on their resource reserves and will not be able to extract these reserves with a 2°C or lower climate target. Thus, their valuation will be reduced and the financial holdings become “stranded assets.”
Fossil Fuel Divestment
Since 2012, the fossil fuel divestment movement has been growing, first in the United States and United Kingdom, with organizers focused on pressuring universities to divest endowment assets on moral grounds. Divestment is about placing sanctions on bad actors in order to get them to change their practices.
According to Wikipedia, “fossil fuel divestment or fossil fuel divestment and investment in climate solutions is the removal of investment assets including stocks, bonds, and investment funds from companies involved in extracting fossil fuels, in an attempt to reduce climate change by tackling its ultimate causes.”
Criticisms of Divestment
Of course, it will take more than institutional divestment to meaningfully slow rising temperatures. Critics have argued that divesting from large fossil fuel or other corporate entities would have little or no impact on these polluting entities. Some higher education institutions, including Princeton and Harvard, have objected to divestment as a politicization of their endowments. Critics of divestment have cited the costs and risks to institutional endowments that divestment would entail, arguing that to divest would go against their fiduciary responsibility.
Also critics like CBS News have said that we must “keep in mind, divestment has never really affected its targets’ bottom lines. For example, South Africa’s economy didn’t suffer, but divestment was part of the chorus of arguments that came together to end apartheid.”
Divestment advocates have responded to these concern by pointing out that not divesting is not a politically neutral act—it is, in fact, choosing the side of fossil fuel corporations. Therefore, they argue that not politicizing this issue would be unethical. We all vote for the products and services that serve humanity, its energy demands, and the planet powerfully and impactfully with our money every single day.
History of Divestment
Historically divestment can take decades to produce results. The New Republic summarizes this history as follows. In the 1970s and ’80s, divestment was the magnifying glass to focus attention on the United States government’s apathy toward apartheid and Nelson Mandela’s imprisonment in South Africa. A 1999 study, for instance, did not find that divestiture impacted South Africa’s economy. The campaign’s effect on Congress may be more difficult to measure, but public pressure did eventually result in political scrutiny and legislation. In 1986, Congress passed sanctions on South Africa.
The modern fossil fuel campaign in the most recent decades has borrowed heavily from the past, with its sit-ins and rhetoric about holding institutions to moral standards. Yet there are some key differences, namely the speed with which divestment has caught on in the U.S. and abroad. It has taken a matter of years, while for apartheid and tobacco it took a decade to get to this point. Social media has certainly played a role in the pace.
The victories at some schools, like Stanford University, surprised organizers themselves. Faculty were circulating a letter to send to administrators when Stanford announced it would divest from coal companies last year. “The fight is just as important as the win in a lot of ways,” McKibben said. “Sometimes you can win almost too quickly in some of these battles. Instead, when you have to spend a few years fighting, then every freshman and faculty member and parishioner will come to know the story of why it’s so important.”
Divestment is Not a Standalone Strategy
It is important to note that according to The New Republic, “divestment is not a strategy in itself, but a useful tactic for driving home the message of the broader campaign: In the case of climate change, the message is how the world needs to transition away from fossil fuels, and relatively fast, if it hopes to combat global warming.”
Divestment needs to be combined remedies and options that work for corporate investors so that the process is incentivized. In order to avoid just punishing companies that serve public good and interests, there needs to be education on working alternatives that are ecologically and economically sustainable.
Join people worldwide asking institutions to divest from dirty energy – pulling their investments out of climate-wrecking companies.
- Beginner’s Guide to Divestment | The Guardian
- Divestment | 350.org
- Divest Harvard
- Fossil Free ANU
- Fossil Free MIT
- Fossil Fuel Divestment Movement | Clean Technica
- Go Fossil Free
- CBC News (2018). Is the divestment movement really hurting fossil fuel companies? Retrieved from https://www.cbc.ca/news/technology/what-on-earth-newsletter-divestment-fossil-fuel-climate-change-1.4953947
- Guardian (2015). Beginner’s guide to divestment. Retrieved from https://www.theguardian.com/environment/2015/jun/23/a-beginners-guide-to-fossil-fuel-divestment
- McKibben, Bill (2018). At last, divestment is hitting the fossil fuel industry where it hurts. Retrieved from https://www.theguardian.com/commentisfree/2018/dec/16/divestment-fossil-fuel-industry-trillions-dollars-investments-carbon
- New Republic (2015). Does divestment work? Retrieved from https://newrepublic.com/article/121848/does-divestment-work
- New Yorker (2018). The divestment movement to combat climate change is all grown up. Retrieved from https://www.newyorker.com/news/dispatch/the-divestment-movement-to-combat-climate-change-is-all-grown-up
- Oxford Research Encyclopedias (2019). Fossil fuel divestment. Retrieved from http://oxfordre.com/climatescience/view/10.1093/acrefore/9780190228620.001.0001/acrefore-9780190228620-e-566
- Trilliumvest (2017). Make a clean break: guide to fossil free investment. Retrieved from http://www.trilliuminvest.com/wp-content/uploads/2017/04/Make-a-clean-break_4.13.17.pdf