Global Divestment Day: Climate Action Vs Carbon Bubble Risk

The fossil fuel divestment movement is gathering steam, with institutions across the world committing to remove dirty energy investments from their stock portfolios, and in just over two months that energy will come to an international head.

Climate advocates 350.org are organizing the first-ever Global Divestment Day on February 13-14, 2015, organizing thousands of people on five continents to take collective action by demanding their respective institutions stop investing in dirty energy for economic and environmental reasons.

From students demanding their universities divest endowments, to individuals closing accounts at banks who finance fossil fuel development, to faith leaders and people dealing with climate change impacts urging action on a moral basis, 350.org says their action “will show that we are a truly global and growing force to be reckoned with.”

Divestment’s Financial Imperative

Skeptics dismiss fossil fuel divestment as environmental folly, but every day the financial imperatives of pulling investments away from volatile fossil fuels become clearer. A 2013 report estimated trillions of dollars were at risk in international stock markets if emissions reductions kick in worldwide, stranding the proven assets comprising much of fossil fuel companies’ worth in the ground – a “carbon bubble” in danger of popping just like the recent housing bubble.

If the carbon bubble bursts, so too could the world’s financial system. Bloomberg New Energy Finance has estimated oil, gas, and coal companies are one of the world’s largest asset classes with $5.1 trillion in current stock value intertwined throughout many of the world’s largest investors and government funds.

But beyond the carbon bubble, fossil fuels represent inherent price volatility. As a commodity dependent upon global supply and demand, fossil fuels are subject to wild price swings. Financial analysts HSBC recently warned 40-60% of total oil and gas market capitalization is at risk, and the United Nations this week said falling oil prices show the “high risk” of fossil fuel investments compared to stable returns from renewable energy. Just this week, Bloomberg reported bond investors who backed America’s shale boom are facing $11.6 billion in potential losses.

A Growing Movement Away From Risky Fossil Fuels

Major financial interests are starting to heed the warning bell. The Bank of England, the world’s eighth-oldest bank and model for most of the world’s central banks, is planning a formal audit of the risks fossil fuel investments pose to financial stability. “Central banks are waking up to the fact that must of the world’s oil, coal, and gas reserves will have to remain in the ground,” said Bank of England’s Joan Walley in a Financial Times interview.

And they’re not alone. 350.org reports hundreds of universities, governments, foundations, and religious institutions have announced divestment commitments – with action happening at a faster pace than the anti-Apartheid movement.

Norway’s $870 billion sovereign wealth fund, one of the world’s largest, will start excluding the heaviest-polluting coal, oil, and gas investments from its portfolio. Even the Rockefeller Brothers Fund, which grew out of Standard Oil, recently headlined a group of 67 foundations with assets of over $4.2 billion in pledging to completely divest from fossil fuels. “Business as usual is simply not an option,” said Stephen Heintz, fund president.

Fortunately, investors looking to park their investments in fossil-free funds have a growing assortment of options. Some of the world’s biggest investment funds are creating new divestment options for individuals, while Fossil Free Indexes recently launched an investment vehicle with similar returns as the S&P 500. Some analysts even say divestment pays better than standard investing – a recent analysis found the Seattle City Employee’s Retirement System would perform much better without its biggest carbon polluter investments.

Get Involved!

With such momentum behind the movement, and such an economic imperative, Divestment Day is poised to bring fossil fuel divestment to an international stage.

350.org is planning a series of online workshops to help with planning (the next one will be held December 9^th), provides a host of downloadable resource toolkit for activists planning events, and even has a list of suggested Divestment Day actions.

So get involved. Personally or professionally, the time is right to divest fossil fuels from our lives.