Carbon+Divestment

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The concept of Fossil Fuel divestment is relatively straightforward, it’s the removal of assets, including stocks, pension funds, bonds, and investments from companies that produce, or consume, coal, natural gas, or oil. According to the I[|ntergovernmental Panel on Climate Change], to avoid dangerous Climate Change, only 1/3rd of known fossil fuel reserves can be extracted and consumed, this so called carbon budget, takes into account other inputs, including deforestation and cement production, should those factors increase, the consumption and use of fossil fuel reserves declines commensurate ([|3]). Per [|Bill McKibben], this carbon budget currently stands at approximately 565 Gigatons, which is approximately 1/5th of the proven reserves of oil, coal and gas. Divestment advocates therefore argue, that 4/5ths of these reserves must remain unutilized. This is supported by a study conducted by University College in London, in the Journal of Nature, concluding that 90% of US and Australian Coal, and nearly all the Canadian Tar sands cannot be extracted and burned if the 2-degree Celsius safety limit is to be maintained ([|4]).

=**Carbon Bubble:**=

The so-called [|carbon bubble] is a financial term used by regulators and investors alike to describe the over-valuation of fossil fuel stocks ([|5]). According to economist Nicholas Stern, ([|2]) of the [|Stern Review on Climate Change] Economics this bubble could be inflating stocks of fossil fuel companies by trillions of dollars ([|2]). This is supported by a 2015 analysis by Citigroup, which concluded that over $100 Trillion could already be economically stranded in fossil fuel assets (McMahon). Per Forbes, 23 of the largest pension funds in the EU and the 20 largest Banks have over $1T in exposure to the carbon bubble, accounting for 5% of total EU pension fund assets, 4% for insurers and 1.4% for banks ([|6]).

=**Inspiration: Protest Divestment in South Africa**=

The 1994 election of[| Nelson Mandela] in South Africa punctuated one of history’s most successful protest divestment campaign ([|19]). Students across the country, opposed to [|Apartheid], lobbied college administrators to divest from companies doing business in South Africa, starting with Hampshire College, and by 1988 a total of 155 colleges had at least partially divested. Soon enough, larger private enterprises had sold stock, between 1985 and 1990 more than 200 US companies cut ties with South Africa, resulting in a $1B loss of direct foreign investment ([|8]). These economic sanctions forced various apartheid segregations codes to be dropped, black South Africans were granted the franchise, and Mandela was successful elected in 1994. While it’s clear that protest divestment was not the only reason why apartheid ended it is widely considered a major contributing factor (Gerthard). [|Archbishop Desmod Tutu] connected the protest divestment in South Africa to the climate change divestment campaign “We must stop climate change. And we can, if we use the tactics that worked in South Africa against the worst carbon emitters...” ([|9])

=**Origins:**=

Spawning from the “Go Fossil Free: Divest from Fossil Fuels!” campaign in 2012 with author Bill McKibben’s “do the math” speaking tour, calling on colleges, cities, religious institutions and pension funds to withdraw their investments from fossil fuel companies. Their stated mission goal: “"We want institutions to immediately freeze any new investment in fossil fuel companies, and divest from direct ownership and any commingled funds that include fossil fuel public equities and corporate bonds within 5 years."([|18])

=**Goals:**=

There are 4 key goals to the Fossil Fuel divestment strategy ([|20]).

1: Leverage the power of individual investors and large institutional investments to make strong statements on the need to end fossil fuel consumption and leverage these institutions towards policy changes. 2: Raise awareness of the fossil fuel economy’s impact on the climate and on communities 3: Lead the market to start considering the negative externalities of carbon emissions, particularly when considering investments in the fossil fuel-based economy. 4: Drive investment capital into clean energy and other solutions that support the transition to a fossil fuel free economy and mitigate the effects of climate change ([|20])

=**Arguments against divestment:**=

Some critics argue against fossil fuel divestment on hypocritical grounds, arguing that because western society is dependent on fossil fuels for economic activity. John Gapper, of the Financial Times argues that the Divestment movement should target companies that emit CO2 rather than only the companies that produce emissions, saying that divestment is a “grand symbolic gesture” that won’t lead to real financial impact, or have a meaningful impact on climate change ([|5]). Others, like Matt Ridley argue that the divestment movement is unethical, because developing nations, much like those that have already industrialized, require fossil fuels for economic advancement.

=**Who has divested?**=

As of September of 2015, more than 400 institutions, and 2,000 individual investors with assets totaling $2.6T ([|11]) have either divested or committed to some form of doing so. Growing from just a handful of college campuses when the movement started in 2011. Large cities like [|Seattle], [|San Francisco] and [|Oslo] and Glasgow are the largest municipalities to do so. The world’s largest sovereign wealth fund, Norway’s Government Pension Fund Global divested from 114 companies ([|11]). The Church of England the Lutheran World Federation of churches and the World Council of Churches, representing over 500 million Christians worldwide have divested from fossil fuel companies. The heirs to the [|Rockefeller] oil fortune have divested, issuing the following statement “Our immediate focus was on coal and tar sands, two of the most intensive sources of carbn emissions. We have worked to eliminate the Fund’s exposure to these energy sources as quickly as possible.” ([|13])

While originally opposed to the idea, describing it as “false solution” to combating climate change the world’s wealthiest charity, the Seattle based Bill and Melinda Gates Foundation sold off $187M worth of British Oil giant BP and over $842M in ExxonMobil holdings. Since 2014, the foundation has reduced its known investments in fossil fuel companies by 85% ([|14].) A move supported by Seattle Mayor Mike McGinn “By taking a public stand, [|Bill and Melinda Gates] could help change the debate and speed up the international response to global warming.”([|14])

The state of California has also seen vast amounts of capital divested from coal companies, the University of California system has sold off more than $200M in coal and oil sands investments, and the State pension fund, the largest in the Unites States has been prompted by state lawmakers to divest $476B away from coal companies ([|11]).

=**Who has decided not to divest?**=

[|Swarthmore] College, the so-called birthplace of the fossil fuel divestment movement, declined to divest its endowment fund from fossil fuel stocks, while describing the fossil fuel divestment campaign on college campuses as “self-flattering and insular” ([|15]). Breaking with his mayoral peers, London Mayor Boris Johnson rejected the call from the London Assembly to divest the City’s pension fund from fossil fuels, a sentiment echoed by UK Environment Secretary Liz Truss, who argues that I believe the right way [to affect investment] is through carbon reduction targets.”([|5]).

One of the most notable, and perhaps controversial holdouts from the academic divestment movement is Harvard University. President [|Drew Gilpin Faust] rejected divestment as neither warranted or wise”, calling its endowment “an economic resource, not an instrument to impel social or political change” (Faust). Arguing that the managers should be wary of using their substantial endowment fund to position the University as a political actor rather than an academic institution. This is in direct opposition to the results of a student referendum on the issue, which garnered 72% support amongst current Harvard students ([|17]).

=**Conclusion:**=

The logic behind the carbon divestment movement is straightforward, use economic means to drive action on global warming. By reducing investments in companies that extract and consume fossil fuels, and reinvesting in new, alternative energies, activist investors can effect change on the market without government action. Typically, investors seek stable, profit maximizing firms to produce steady returns, however the fossil fuel divestment movement is a recognition that fossil fuel companies are no longer a safe investment either financially or ecologically.


 * Works Cited:**

1: Bill McKibben - Author. Educator. Environmentalist. []

2: Stern, Nicholas. "Stern Report." World Wildlife Fund Sweeden. Accessed December 7, 2016. [|http://www.wwf.se/source.php/1169157/Stern Report_Exec Summary.pdf].

3: Clark, Duncan. "How Much of the World's Fossil Fuel Can We Burn?" 2015. Accessed December 07, 2016. [].

4: Wright, Chris. "Will The Carbon Bubble Be The Next Financial Crisis?" Forbes. February 02, 2015. Accessed December 07, 2016. [].

5: Howard, Emma. "A Beginner's Guide to Fossil Fuel Divestment." Keep It in the Ground. 2015. Accessed December 07, 2016. [].

6: McMahon, Jeff. "'What Carbon Bubble?' Says Oil Company Economist." Forbes. March 03, 2016. Accessed December 07, 2016. [].

7: Grover, Sami. "Could the Carbon Bubble Ruin Your Retirement?" MNN - Mother Nature Network. 2015. Accessed December 07, 2016. [].

8: Gethard, Gregory. "Protest Divestment And The End Of Apartheid." Investopedia. 2008. Accessed December 07, 2016. [].

9: Tutu, Desmond. "We Need an Apartheid-style Boycott to save the Planet | Desmond Tutu." Opinion. 2014. Accessed December 07, 2016. [].

10: "U.S. Energy Information Administration - EIA - Independent Statistics and Analysis." International Energy Outlook 2016-World Energy Demand and Economc Outlook - Energy Information Administration. Accessed December 07, 2016. [].

11: Luckerson, Victor. "Fossil Fuel Divestment Has Kicked into Overdrive." Time. Accessed December 07, 2016. [].

12: Welch, Ivo. "Why Divestment Fails." UCLA Newsroom. 2014. Accessed December 07, 2016. [].

13: "Divestment Statement." Rockefeller Brothers Fund. 2016. Accessed December 07, 2016. [].

14: Carrington, Damian. "Bill and Melinda Gates Foundation Divests Entire Holding in BP." Keep It in the Ground. 2016. Accessed December 07, 2016. [].

15: "Swarthmore College." Divestment Debates :: Environmental Studies :: Swarthmore College. Accessed December 07, 2016. [].

16: Faust, Drew. "Fossil Fuel Divestment Statement | Harvard University." Harvard University. October 03, 2013. Accessed December 07, 2016. [].

17: McKibben, Bill. "Harvard, Ye Hypocrites." Boston Magazine. September 2015. Accessed December 07, 2016. [].

18: McKibben, Bill. "The Case for Fossil-Fuel Divestment." Rolling Stone. 2013. Accessed December 07, 2016. [].

19: Counts, Cecelie. "Divestment Was Just One Weapon in Battle Against Apartheid." January 1, 2013. Accessed December 07, 2016. []

20: Apfel, Daniel C. 2015. "Exploring Divestment as a Strategy for Change: An Evaluation of the History, Success, and Challenges of Fossil Fuel Divestment." Social Research 82 (4): 913-937,1050. [].