When Bill McKibben and 350.org spear-headed a campaign to divest from fossil fuels and go 100 percent renewables as part of a multi-pronged strategy to confront ramping harms from global climate change in 2012, the big push-back was “divestment doesn’t work, it’s just feel-good, someone else will just buy the stocks when prices drop.”
The Green Mouse That Roared
As if where individuals, banks, investment firms and governments put their money doesn’t matter. As if monetary policy at all levels isn’t an enabler of energy and climate policy. As if the world were awash in an infinite flood of money. As if capital just magically grows on trees.
The detractors clearly didn’t get it. They’d already lost the argument. But the ultimate realization would take years to materialize.
The divestment movement wasn’t so much about the short-term, day to day, flux of money on the financial markets. It was instead aimed at triggering a long term mega-trend. The movement did this by shining a light on the intrinsic immorality of fossil fuel burning. By changing the terms of the environmental debate to include such objects as financial risk and stranded assets. By meeting investors on their own intellectual turf on a daily basis. And by revealing to them the very serious and real risk of loss they were exposed to by pumping money into an energy source that produces widespread, ramping and systemic harm.
A long game that is presently gaining some very significant traction. For it appears that Bill McKibben and the various proponents of the divestment movement have managed to outflank the fossil fuel industry on what was, hitherto, intellectual ground under their unquestioned control. They became, all of us involved became, the green mouse that roared.
(The divestment movement helped to shine a light on the various glaring financial risks involved in continued fossil fuel burning. A primary issue being that due to damage caused by climate change, losses to the whole financial system would eventually greatly outweigh gains. At which point, sunk fossil fuel assets would become stranded due to investor flight. Image source: Carbon Tracker.)
We used text analytics software to sift through 42,000 news articles about climate change between 2011 and 2015 and map the influence of the radical flank. In this analysis, we found that the divestment campaign expanded rapidly as a topic in worldwide media. In the process, it disrupted what had become a polarized debate and reframed the conflict by redrawing moral lines around acceptable behavior.
Our evidence suggests this shift enabled previously marginal policy ideas such as a carbon tax and carbon budget to gain greater traction in the debate. It also helped translate McKibben’s radical position into new issues like “stranded assets” and “unburnable carbon,” the idea that existing fossil fuel resources should remain in the ground.
Although these latter concepts are still radical in implication, they adopt the language of financial analysis and appeared in business journals like The Economist, Fortune and Bloomberg, which makes them more legitimate within business circles.
Thus, the battle cry of divestment became a call for prudent attention to financial risk. By being addressed in these financial publications, the carriers of the message shifted from grassroots activists to investors, insurance companies and even the Governor of the Bank of England.
Mass Divestment Underway as Climate Change Impacts Worsen
Today the world is starting to wake up, bleary eyed and hung over from tar sands smog, to the reality that climate change is poised to eat everyone’s lunch. The U.S. has been hammered by not one, not two, but three $100 billion dollar plus hurricanes. All of those storms were made worse by climate change and one — Harvey — was found to be three times more likely due to the heat trapping gasses fossil fuel based industry has collectively pumped into the world’s atmosphere. With the Thomas Fire threatening to burn down Santa Barbara in December, California is reeling from its worst fire season on record. And glaciers from Greenland to Antarctica are teetering at the brink — poised to inundate the world’s cities at rates far faster than previously expected with only just a bit more added fossil fuel trapped heat.
(How investments in fossil fuel based industry generate carbon emissions. Image source: Carbon Tracker.)
That’s with global temperatures at only 1.1 to 1.2 C above 1880s averages. Keep burning fossil fuels and we’ll hit 3 to 7 C or more by 2100. And folks already feeling the pain of lost financial stability, lost homes, or forced displacement are starting to cry uncle.
Investors holding the fossil fuel industry’s purse strings appear to have had enough. AXA Equitable CEO Thomas Buberl this week stated: “A 4 C world is not insurable.” The major financial and insurance firm has pledged to invest 10.6 billion in environmentally friendly projects and to move 4 billion in funds out of fossil fuels by 2020.
But AXA isn’t the only one by far. Other banks, firms, and share holders are realizing in droves that investing in a 4 C world by throwing more money at fossil fuels isn’t worth a darn either. The World Bank just announced it will stop investing in upstream oil and gas projects by 2019. The 23 large regional investors of the International Development Finance Club, who hold 4 trillion in assets, have agreed to align their procurement with the goals of the Paris Climate Summit. Dutch ING bank has announced that it won’t fund any utility that relies on coal for more than 5 percent of its energy.
Meanwhile, an umbrella group managing 26.3 trillion dollars in assets is directly targeting the world’s top 100 carbon emitters. The group — called Climate Action 100 — comprises 225 pension funds and other investors. And it aims to get the world’s worst carbon emitters to curb their greenhouse gas pollution and to disclose their climate change related risks to share holders. Oil, gas, coal, cement, mining and major transportation players are all in Climate Action 100’s sights.
(Renewables possess superior economics in a number of key facets. 1. They have a positive learning curve — the more you build the less they cost. 2. They reduce healthcare costs to society and increase productivity. 3. They reduce ramping systemic harms from climate change by replacing fossil fuel burning. Image source: Union of Concerned Scientists.)
The shareholders from Climate Action 100 have effectively drawn a line in the sand. If these top emitters fail to act to reduce their carbon pollution, then the investors from the group will move their money elsewhere. Effectively, this action is directly from the divestment playbook. But it is now one that lives entirely in the realm of global finance. In other words, it’s not just an environmentalist thing. Global finance, in other words, has been infused with rational environmental thought to the point that it owns it.
Mindy Lubber, President and CEO of Ceres notes in an interview to Motherboard:
“These investors are the largest owners of companies and they see climate change as a serious threat to their investments and the global economy. They believe it is imperative these companies move away from high-carbon emitting activities. Such companies [top 100 emitters] are unlikely to have economic success [if they don’t adjust to the reality of climate change].
Strong Renewable Energy Economics Mean Investors are No Longer Captive to Dirty Energy
This push for divestment from fossil fuels and holding fossil fuel industry accountable by many of the world’s wealthiest banks and firms comes as renewable energy is making major gains. Solar and wind energy are now less expensive than coal or even gas in many markets. The price of electrical vehicles is falling even as these non-emitting forms of transportation are becoming more capable than traditional ICE vehicles. And the price of related battery storage is also plummeting. So it’s not as if there is no viable alternative to dirty and dangerous fossil fuels. In fact, the alternatives are much more attractive on their own merits. Investors have options at hand to confront climate change. So do the rest of us. And that whole divestment thing that was nonsensically poo-pooed by naysayers — it’s becoming as ubiquitous as Oxygen.