What is divestment?
Divestment is simply the opposite of investment – it means getting rid of stocks, bonds or investment funds that are unethical.
Fossil fuel companies are some of the wealthiest and most powerful companies on the planet, and they’re using their money, power and influence to block every serious attempt to stop climate change.
By convincing our institutions to divest and publicly break their ties, we can weaken the political influence of the fossil fuel industry. Every time an institution publicly breaks its ties with fossil fuel companies, we chip away at their power to carry out their immoral business plans.
The environmental arguments to divest are obvious: the agenda of the fossil fuel industry is just not compatible with the survival of our planet and the health and safety of the people who live on it. Unless coal, oil and gas production currently in operation is retired early, emissions from existing projects will push global temperature rise past safe limits That means we cannot open any new fossil fuel projects and we have to phase out existing ones.
But the arguments in favour of divestment don’t stop there.
Divestment makes financial sense
Fossil fuel stocks are on a long-term downward trajectory, and COVID-19 has only sped this process up. Renewables stock prices are growing year on year.
Not divesting risks serious costs to institutions’ investment funds. For instance, the value of oil company shares owned by UK public pension funds fell by £2bn in less than four years. In 2015, LGPS funds lost a collective £683m by not divesting from coal.
The energy transition is well under way and divesting from fossil fuels now offers an opportunity to make smarter, more profitable investments.
Divestment is also one of the most direct ways that people in the UK can take action to support countries in the global south that are some of the worst affected by exploitative oil giants and the repercussions of their immoral business plans. For instance, Shell has been involved in several high-profile environmental scandals in recent decades, paying millions of dollars of fines for its operations in Nigeria and threatening to drill in the fragile environment of the Arctic.
Recently, both the UK government’s foreign credit agency (UKEF) and oil company Total have come under fire for plans to build a gas project in Mozambique, despite significant adverse environmental and social impacts associated with the mega-project.
There are countless examples throughout history of fossil fuel companies trampling on human rights and wrecking our planet.
Determined to maximise their profits at any cost, the fossil fuel industry is a perfect example of corporate power dictating policies against the public interest. They have successfully used their financial might and political influence to deceive the public on climate change and lobby against action on climate change. The fossil fuel industry has been known to mistreat its workers and some corporations have been linked to tens of thousands of premature deaths, the pollution of rivers and the deforestation and destruction of indigenous homeland to make way for oil pipelines.
Action is needed to dismantle the power and influence of this reckless industry and instead prioritise the health and rights of people around the world.
Successful divestment campaigns have been fought in a number of sectors with great effect.
Nowhere was it more powerful than in the case of South African apartheid, where an international divestment effort played a major role in breaking the back of the regime and ending racial segregation. By the mid 1980s a movement initiated by students saw 155 campuses, 26 state governments, 22 counties, and 90 cities divest from companies doing business in South Africa. This, alongside the struggles of people within South Africa, played a key role in stigmatising apartheid and the government on the world stage, and ultimately led to legislative change. Archbishop Desmond Tutu, one of the most revered figures of South Africa’s anti-apartheid struggle, also expressed his support for fossil fuel divestment.
Globally, the divestment movement is having a significant impact on the clout of the fossil fuel industry. The number of institutional investors committed to divest has risen from 180 in 2014 to more than 1,500 in 2021. As a result of campaigners’ efforts, Royal Dutch Shell listed divestment campaigns as a material risk in its 2019 annual report, and Bob Dudley, the former CEO of oil giant BP, said in 2018 that activists’ efforts could “threaten energy security and the global economy”.
We are calling on institutions like councils, universities, faith groups, charities and more to:
- immediately freeze any new investment in the top 200 publicly-traded fossil fuel companies
- divest from direct ownership and any commingled funds that include fossil fuel public equities and corporate bonds within 5 years
The companies that we’re asking institutions to divest from are called the Carbon Underground 200. These are the 200 companies with the biggest coal, oil and gas reserves in the world – and therefore the worst offenders in terms of damaging the planet and accelerating climate change.
Thanks to the efforts of campaigners, the divestment movement is continuing to build momentum and win victories across the board.
Institutions in the UK that have committed to divesting from fossil fuels include:
- More than half of all universities
- More than 80 faith institutions, including the Church in Wales, the United Reformed Church and Baptist Union of Great Britain
- Five local government pension funds (Waltham Forest, Islington, Lambeth, Southwark and Cardiff)
- Charities and foundations, such as The Joseph Rowntree Charitable Trust
- Devolved governments, including the pension funds of both the Northern Ireland Assembly and Welsh Parliament
- Health institutions, including the Royal College of GPs and the British Psychological Society
- The biggest pension fund, the government-backed National Employment Savings Trust (Nest) scheme with nine million members has committed to divesting from companies involved in coal mining, oil from tar sands and arctic drilling, and more recently from another five fossil fuel companies (including ExxonMobil) that the fund identified as “unresponsive” on climate
Globally, more than 1,500 institutions have made a divestment commitment, which equates to a value of over $39 trillion in value.
This includes ABP — the pension fund for Dutch civil servants and one of the largest in the world. The fund made the decision to divest in October 2021, stating that they saw “insufficient opportunity for us as a shareholder to push for the necessary, significant acceleration of the energy transition at these companies.”
Click here for some more in-depth case study examples of funds that have divested and how they have gone about doing this.