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Divestment Year in Review 2021
Image by Carolyn Fortuna / CleanTechnica

Climate Change

Divestment Year in Review 2021

How has the divestment movement changed the conversation around fossil fuel finance in 2021?

Divestment in today’s financial marketplace means getting rid of stocks, bonds, or investment funds that support fossil fuels. We feel compelled to do so, morally and ethically, because we are keenly aware how the fossil fuel industry contributes to the existential climate crisis that surrounds us.

This “Divestment Year in Review 2021” looks to important progress that:

  • Holds fossil fuel companies responsible for their destructive influence on our world
  • Works to break the grasp that the fossil fuel industry has on our economy and our governments
  • Celebrates shifts to renewable energy

The UN secretary general summed it up well this year: the collective global realization that carbon emissions must be dramatically reduced is becoming a “death knell” for the fossil fuel industry.

As we look for methods to spend in a greener way, we buy more sustainably or invest so that we that don’t reward companies that contribute to global warming. Importantly, divestment as an act of social conscience recognizes that we all have an obligation to rise up for justice alongside communities who live on the frontline of industrial oil’s destructive, polluting operations.

We all want our money to work for us, and now many investors than ever are working to save the planet. It becomes easier to do so if the decisions make financial sense, too. As fossil fuel stocks falter, what’s now often called impact investing funds are gaining our attention.

The international network of divestment campaigns are persuading institutions to move to impact investing, according to Fossil Free Divestment by:

  • Immediately freezing any new investment in fossil fuel companies
  • Divesting from direct ownership and any commingled funds that include fossil fuel public equities and corporate bonds within 5 years
  • Ending their fossil fuels sponsorship

Several Years of  Divestment Progress

We at CleanTechnica have been trying to make transparent the forward momentum of divestment over the last several years. Here are some of those highlights.

In 2018, major divestments included AG2R la Mondiale (US$114 billion), Australian Vision Super Fund (US$9 billion), and Brandeis University (US$997 million). That year, two contradictory theories were being floated. 1) The “green paradox” hypothesized that near-term CO2 emissions would rise above the “well below” 2 °C baseline as fossil fuel owners frontload supply from their endowments. They’d evade the negative consequences of future fossil fuel price drops due to planned climate policies. 2) The “divestment effect” argued that near-term CO2 emissions would decrease below the baseline as investors avoided fossil fuel-based infrastructures with high emission intensities, high capital costs, and long technical lifetimes that could become stranded. (Both theories partially came to be.)

In 2019, the news was quite optimistic, as 1110 institutions with more than $11 trillion in assets under management had committed to divest from fossil fuels. The leap amounted to $52 billion in 2014 — a stunning increase of 22,000%. Moreover, the powerful fossil fuel industry saw a steady decline in its S&P position, with fewer institutional investors, depressed profits, and a weak outlook. BP Plc, Repsol SA, and Equinor ASA wrote off more than $11 billion in total from the value of North American shale assets.

In 2020, 42 faith institutions from 14 countries announced their divestment from fossil fuels. BlackRock, the world’s largest asset manager, informed clients that environmental sustainability would be a key factor in investment decisions going forward. The New York State pension fund announced it would divest from the riskiest oil and gas companies by 2024 and decarbonize its entire portfolio by 2040 — valued at over $500 billion. Lloyd’s, the world’s biggest insurance market, set a market-wide policy to stop new insurance cover for coal, oil sands, and Arctic energy projects by January 2022 and committed to pulling out of the fossil fuel business altogether by 2030. Storebrands (a Nordic hedge fund worth more than $90 billion) moved to divest from Exxon, Chevron, and Rio Tinto. Norwegian Sovereign Wealth Fund sold $3 billion worth of energy stocks and other companies it determined were seriously harming the environment.

Divestment Year in Review 2021 — The Progress Continues

There are now $39.2 trillion in assets under management, across 1,485 institutes, committed to be divested from fossil fuels — up from $52 billion across 181 institutions in 2014.

Making visible the profits and devastation caused by the fossil fuel industry is essential to the divestment movement, and the Carbon Underground has helped a lot toward that goal by identifying the 200 top global publicly-owned coal, oil, and gas reserves owners ranked by the carbon emissions embedded in their reserves. The Carbon Underground research also quantifies implied risks from fossil fuels, revealing that solar and wind potential is far higher than that of fossil fuels and can meet global energy demand many times over, unlocking huge benefits for society. With current technology and in a subset of available locations, we can capture at least 6,700 petawatt-hours per annum from solar and wind, which is more than 100 times global energy demand.

The University of Michigan and Amherst College made pledges to divest in 2021. So, too, did Harvard University, the Ford Foundation, and French bank La Banque Postale. OMV announced the completion of the divestment of its stake in the Wisting oil field located in Norway. The Vatican argued that divestment from fossil fuels is now a “moral imperative.”

The report, titled “Invest-Divest 2021: A Decade of Progress Toward a Just Climate Future,” claims that divestment has “helped rub much of the shine off what was once the planet’s dominant industry.” Divestment has proven successful at its core goal of helping to delegitimize fossil fuel companies as political players. While the remaining power of these companies should not be underestimated, the report’s authors say it has clearly diminished.

Final Thoughts on the Divestment Year in Review 2021

Public opinion of fossil fuel use has plummeted both globally and in the US. The Divestment Year in Review 2021 has seen another record for investment products sold as being ESG- (environment, social, and governance) related. Bloomberg Green relates that 2021 was a year of big fees for US managers of sustainable funds, with revenue climbing to almost $1.8 billion from $1.1 billion in 2020. Predictions include investors who are looking to back companies that do everything from upgrading electrical grids and transmission lines to developing erosion-control and drainage systems or making more weather-resistant building materials.

If plans at Bank of America are any indication, more and more companies will look to the green marketplace. Bank of American intends to deploy and mobilize $1 trillion by 2030 to accelerate the transition to a low-carbon, sustainable economy, as part of a broader $1.5 trillion sustainable finance goal aligned to addressing the United Nation’s Sustainable Development Goals (SDGs). That multi-year financing commitment would provide financial capital, along with significant intellectual capital, to develop solutions to climate change and other environmental challenges. It will necessarily focus on low-carbon energy, energy efficiency, and sustainable transportation, in addition to addressing other important areas like water conservation, land use, and waste.

Of course, there is still a lot of work to be done. Bloomberg Green reported in May that the $887 million of revenue investment bankers derived from green bond customers can’t compare with the $1.4 billion drawn from fossil-fuel clients. The lowdown is that banks are garnering about 40% more in fees from helping out fossil-fuel companies. The 60 largest commercial and investment banks have collectively financed $3.8 trillion in fossil fuel companies between 2016 and 2020, the 5 years since the Paris Agreement was signed.

That and other data was included in a report titled “Banking on Climate Chaos 2021.” The report authors argue, until the investment bankers prove otherwise, the “net” in “net zero” leaves room for emissions targets that fall short of what the science demands, based on “copious offsetting or absurd assumptions about future carbon-capture schemes, as well as the rights violations and fraud that often come hand in hand with offsetting and carbon markets.”

It’s been nearly been 10 years of advocacy to delegitimize fossil fuel holdings. The divestment movement has become a major global influence on energy policy, and the pressure to divest from fossil fuels has led to changes across society, economies, and climate policies. Now we need more of the financial world to join in so that the Divestment Year in Review 2021 is just a beginning place toward systemic change.

Image by Carolyn Fortuna / CleanTechnica

 
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Written By

Carolyn Fortuna (they, them), Ph.D., is a writer, researcher, and educator with a lifelong dedication to ecojustice. Carolyn has won awards from the Anti-Defamation League, The International Literacy Association, and The Leavy Foundation. Carolyn is a small-time investor in Tesla. Please follow Carolyn on Twitter and Facebook.

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