Published on January 2nd, 2020 | by Carolyn Fortuna0
2019 Divestment Year In Review
January 2nd, 2020 by Carolyn Fortuna
Want to join in the fastest growing social movement in history? Do you have what it takes to step up to a moral call to action that began with student voices? Then it’s time for you to divest. Interestingly, it’s not just individuals who are making financial sacrifices to disempower the fossil fuel industry — the surge in financial management funds away from fossil fuels is at the heart of our 2019 Divestment Year in Review.
2019 was a ground-breaking year for people who refuse to support the fossil fuel industry with their investments. To date, over 1110 institutions with more than $11 trillion in assets under management have committed to divest from fossil fuels. Assets committed to divestment have leaped from $52 billion in 2014 to more than $11 trillion today — a stunning increase of 22,000%.
Institutions committed to divestment include sovereign wealth funds, banks, global asset managers and insurance companies, cities, pension funds, healthcare organizations, universities, faith groups, and foundations. Momentum for divestment has only accelerated over time, as pledges now span at least 48 countries, with over 70% of commitments coming from outside the US. Declared divestment sites now include major capital cities like New York City and Paris.
The momentum has been driven by a people-powered grassroots movement. Ordinary people on every continent are pushing their local institutions to take a stand against the fossil fuel industry and for a world powered by 100% renewable energy.
In July, the head of Organization of the Petroleum Exporting Countries (OPEC) said that the climate movement is the biggest menace to these oil-producing nations in the future. Mohammed Barkindo, the secretary general of OPEC (the cartel representing 14 countries with 80% of the world’s oil reserves), said, “Climate activists and their ‘unscientific’ claims are perhaps the greatest threat to our industry going forward.”
And his prediction may be coming true more quickly than many oil insiders thought could be possible.
Fund Managers Change Course in 2019 Divestment Moves
The powerful fossil fuel industry continues its steady decline as evidenced by its last-in-class S&P position in 2018, a decade of lagging stock market performance, fewer institutional investors, depressed profits, and a weak outlook. The oil and gas sector went from occupying 29% of the S&P 500 in 1980 to just 5.3% in 2018, the lowest level in more than 40 years.
In August, 2019, the Institute for Energy Economics and Financial Analysis (IEEFA) released a report that described how BlackRock, the world’s largest fund manager with $6.5 trillion of assets under management – bigger in value than the third largest economy in the world – accrued $90 billion in estimated losses.
- 75% of those losses are due to its investments in 4 companies alone – ExxonMobil, Chevron, Royal Dutch Shell, and BP.
- BP Plc, Repsol SA, and Equinor ASA have written off more than $11 billion in total from the value of North American shale assets just this year.
- Chevron’s announcement in December that it expects to write down the value of its assets by $10 billion to $11 billion this quarter may be a sign of even more industry turmoil and philosophy shifts.
Amundi, the 10th largest asset manager in the world, holding investments from pensions and savings worth $1.55 trillion, announced that it will no longer invest in companies that make more than 30% of their business from coal. In a brief to investors, the company outlined its transitional approach to investment based on climate change data. The company stated:
- The impacts of climate change on our environment are growing and are increasingly visible.
- Investors and asset managers should not overlook climate change-related risks in their risk management framework.
- Financing the global energy transition requires tremendous financial needs and presents a unique investment opportunity.
- Mobilization seems to be under way.
- Amundi seeks to accompany investors to fight against climate change by bringing stakeholders together for knowledge sharing and best practice spreading and designing innovative financial solutions that attempt to tackle climate change across asset classes.
The European Investment Bank has agreed to phase out its multibillion-euro financing for fossil fuels within the next 2 years to become the world’s first ‘“climate bank.” The bank will end its financing of oil, gas, and coal projects after 2021, a policy that will make the EU’s lending arm the first multilateral lender to rule out financing for projects that contribute to the climate crisis. Bill McKibben, founder of 350.org, wrote in an editorial for The Guardian, “That plan fits with the facts: when the world’s climate scientists declared last autumn that we would need to have fundamentally transformed our energy sector within a decade, it was clear that the first job was to stop building any new infrastructure.”
Fossil Free says 3 trends are converging that will “ultimately spell the demise of the fossil fuel industry.”
- Banks such as Crédit Agricole in France are cutting financing for fossil fuel projects, particularly high risk projects such as coal and tar sands.
- Insurance companies such as Axa are ending underwriting for coal projects worldwide.
- The divestment movement is drying up investment capital to the companies perpetuating climate chaos.
Without these integral financial institutions, the fossil fuel industry becomes stalled. Yes!
What Might the Future Hold for Divestment?
“Financing the Future: The Global Climate Divest-Invest Summit” took place in September, 2019 in Cape Town, South Africa. The Summit offered leaders the opportunity to share significant announcements that underscored the truly global nature of the divest-invest movement. Among the list of commitments generated toward financing the future was an “overwhelming call for dramatically increased investment” in:
- Distributed, people-led renewable energy solutions
- Building strong, intersectoral collaboration — such as the links between food, energy, just transition, waste, and other areas
- Strengthening communication on health and energy in relation to these issues
The University of Auckland, New Zealand, the country’s largest university, noted during the Summit that it had divested from fossil fuels in response to a 5-year, student-led campaign which used tactics including petitions, reports, creative actions, and an occupation of the vice chancellor’s office. The endowment is worth $224 million (New Zealand) dollars.
Fund our Future, in partnership with Change.org, announced the launch of the Green New Deal for Africa, a systemic, crowd-sourced response to the divest-invest movement that addresses the north-south extractive relationship and “calls on partners from all sectors to become involved in this historic redress.”
Final Thoughts for 2019 Divestment
In his meeting with finance ministers at the Vatican last May, Pope Francis urged the audience to take corrective measures to address fossil fuel financing and said:
“We live at a time when profits and losses seem to be more highly valued than lives and deaths, and when a company’s net worth is given precedence over the infinite worth of our human family. You are here today to reflect on how to remedy this profound crisis caused by a confusion of our moral ledger with our financial ledger.”
Perhaps it will take more discourse around the reasons why divestment is so crucial as climate action. For example, last November students and alumni from Harvard and Yale disrupted the annual football game between the two elite universities, occupying the field at half-time and demanding the colleges divest from investment in fossil fuels. The end result was the creation of a fund to help protestors with legal fees. As the 2020 Presidential elections approach, we need to ask questions of the candidates about their intention to remove subsidies and other financial preferential treatments for the fossil fuel industry as part of the divestment big picture. Our future depends on it.
— Fossil Free Yale (@FossilFreeYale) November 24, 2019
I support the students, organizers, and activists demanding accountability on climate action and more at #HarvardYale. Climate change is an existential threat, and we must take bold action to fight this crisis. https://t.co/lm1V6honI4
— Elizabeth Warren (@ewarren) November 24, 2019