Originally Published: 11/24/2015
DIVEST YOUR MONEY FROM FOSSIL FUELS:
BE A PART OF THE SOLUTION
By The Issue Wonk
**A special thanks goes out to 2 good friends who wrote some of this when we did a presentation recently for a church on divesting individual portfolios from fossil fuels.**
Given the recent bad news that the planet has warmed 1° Celsius over pre-industrial levels and that we’ve surpassed the 400 ppm threshold for carbon dioxide in the atmosphere, I’d say that the COP21 has got it’s work cut out for them. (TWW, COP21, 11/14/15) But what can we do? Sure, we’ve cut our use of gasoline. We’ve stopped accepting plastic bags from stores. We’ve converted from incandescent lightbulbs. We’ve stopped using plastic water bottles. We’re walking more, turning our thermostats down, everything we can think of. Some have even bought electric or hybrid cars, put solar panels on their homes, and any number of other things. But it’s not enough. So, what more can you do? Look at where you have your money. Is any of it invested in fossil fuels? Divest -- Today!
Why divest? Let the Reverend Desmond Tutu explain it to you. (You Tube)
There are 3 very good reasons to divest your individual portfolio from fossil fuels and reinvest in renewable energy. Let me tell you about them.
DIVEST TO ALIGN YOUR INVESTMENTS
WITH YOUR VALUES
For many years people have aligned their investments with their values. Many shun what has been called “sin” stocks like tobacco, alcohol, and gambling. And remember the anti-Apartheid movement of the 1980s? All around the world people and organizations stopped investing in South Africa and it worked. The Apartheid government was toppled. The same thing is going on with fossil fuels. A coalition of medical organizations has called for the health sector to divest from fossil fuels because of the harm from climate change to human health. Pope Francis has called for caring for our “common home” by addressing the problem “that can no longer be left to a future generation.” And, as you saw above, the Reverend Desmond Tutu is calling for divestiture. You, too, can put your money where your mouth is and play a part in stopping the destruction of life on earth by fossil fuels by divesting your investments.
Bloomberg reported at the Science of Singularity: “The question is no longer if the world will transition to cleaner energy, but how long it will take. In the chart below, BNEF [Bloomberg New Energy Finance] forecasts the billions of dollars that need to be invested each year in order to avoid the most severe consequences of climate change, represented by a benchmark increase of more than 2 degrees Celsius. The blue lines are what’s needed, in billions, the red lines show what’s actually being spent. Since the financial crisis, funding has fallen well short of the target, according to BNEF.”
As this graph indicates, we need to act now on climate change. The longer we postpone action, the more draconian the measures will need to be in order to correct the path we are taking. Reducing investments in fossil fuels is a rapid way to do this.
According to a 2013 report from the American Association for the Advancement of Science entitled, What We Know: The Reality, Risks, and Response to Climate Change,
Earth’s climate is on a path to warm beyond the range
of what has been experienced over the past millions of
years. The range of uncertainty for the warming along
the current emissions path is wide enough to
encompass massively disruptive consequences to
societies and ecosystems: as global temperatures rise,
there is a real risk, however small, that one or more
critical parts of the Earth’s climate system will
experience abrupt, unpredictable and potentially
irreversible changes. Disturbingly, scientists do not
know how much warming is required to trigger such
changes to the climate system.
As this report says, “The sooner we act, the lower the risk and cost. And there is much we can do.”
DIVEST TO SHAPE PUBLIC POLICY AND
LIMIT THE INFLUENCE OF ENERGY COMPANIES
Another reason to divest from fossil fuels is to stop the industry from stealing from the public. Fossil fuel industries privatize the profits but socialize the costs. These costs are called externalities – like removing mountain tops, poisoning ground water and streams, despoiling coastlines, polluting the air. These are costs that the public must pay. The fossil fuel industry does not pay for the true costs of its environmental destruction. It does not pay for the illnesses it causes. It does not pay for the carbon it discards in the atmosphere, accelerating climate change. It does not pay for the impact of climate disruption on our communities, including property damage and crop loss resulting from increasingly violent storms. We, the public, pay for all these things so that the fossil fuel industry can pocket ever greater profits.
Also, all these profits are being used to buy influence with state and federal governments – influence used against the public interest. Their political power assures them of unfair advantage to continue to dominate the energy market with dirty energy at a time when we desperately need to transition to clean, renewable energy. They also use this political power to lobby against needed clean energy incentives. It’s made even worse by the fact that the fossil fuel industry receives government subsidies which add to its profits. And the industry uses its profits to market to the nation that climate change doesn't exist by hiring so-called scientists to produce spurious research saying it's not happening.
For decades fossil fuel companies have spent billions of dollars to get subsidies and tax breaks, block carbon reduction goals, and fight support for renewable energy. They have so much political power that the only way to stop them is with our wallets.
Divestiture from investments in fossil fuels has been embraced all over the world. This graph from Arabella Advisors’ September 2015 report, illustrates the 436 institutions and 2,040 individuals across 43 countries that have divested - representing $2.6 trillion in assets. Countries like Scotland and Chile have divested. The Norwegian Parliament ordered its sovereign wealth fund to divest. The City of Sao Paulo, Brazil has divested. The City of Newcastle, Australia, which has the most coal going through its port every day, just voted to divest its $270 million portfolio from fossil fuels, including coal. And just recently the State of California passed a coal divestment bill. It's the first to pass a state-level bill which requires the California Public Employees' Retirement System and the California State Teachers' Retirement System to divest from all companies that get at least half of their revenue from coal mining. These 2 retirement systems are responsible for $476 billion in assets.
Religious organizations and churches are doing it. The first was the United Methodist Church followed soon thereafter by the Unitarian Universalist Association. The World Council of Churches is divesting, as is the Lutheran World Federation and the Church of England. And there are many individual congregations across the world divesting their meager funds from fossil fuels.
Many colleges and universities are divesting completely or in part. Universities like the University of Glasgow, Stanford University, Syracuse University, University of Washington, and the University of Maine. Recently the University of California system sold off $200 million from its endowment and pension fund holdings in coal and oil sands companies. Smaller colleges and community colleges are also divesting, like Sterling College in Vermont, Naropa University in Boulder, Colorado, and DeAnza and Foothill Community Colleges in the San Francisco Bay area. And students at Swarthmore, Yale, and others are demanding their institutions divest. Harvard just divested $108 million.
There are many other organizations divesting from fossil fuels and reinvesting in renewable energies. The British Medical Association, The Guardian Media Group, and – you'll love this – The Rockefeller Brothers Fund, founded with a $860 million endowment from Standard Oil, has begun divesting from fossil fuels and reinvesting in renewable energy industries.
But what about individuals? What about your portfolio? Haven’t got a lot of money? Doesn’t make any difference. Look at this graph from the Arabella Advisors report. 51% of individuals divesting have less than $100,000 to invest. This includes, of course, people with only a few thousand dollars to invest. So, concern about investments in fossil fuels isn't just for the very wealthy. It's for all of us. Every one of us. It's our responsibility – not someone else's.
DIVEST TO POTENTIALLY REDUCE
YOUR FINANCIAL RISK
Fossil fuel industries have been losing money. Renewable energy industries have been doing better. According to the Motley Fool, since 2007 “electricity generation from coal has fallen 24.9%” but generation from wind grew 309% and solar grew 607%. That doesn't include solar on residential roofs “or any installations from 2013, which was a record year for solar, installing about 4.4 GW [gigawatt] in the U.S.” And Tim McDonnell, writing for Mother Jones, reported that, according to projections from Bloomberg, by 2030 “renewables will account for 70% of new power supply worldwide.”
A report published in the Political Economy Research Institute entitled Global Green Growth: Clean Energy Industrial Investments and Expanding Job Opportunities, found that renewable energy sector is producing more jobs than the fossil fuel sector. Indeed, forecasts show that the power generation capacity of fossil fuels is beginning to decline. At the same time the forecast for power generation of clean energy is climbing.
This graph created by the Bloomberg New Energy Finance (BNEF) illustrates that the fossil fuel power generation capacity has been decreasing since 2013. The clean energy sector, however, is projected to increase, especially in solar and wind over the next 15 years.
According to the Arabella Advisors report:
Reports by Citigroup analysts, HSBC, Mercer,
the International Energy Agency, Bank of England,
Carbon Tracker Initiative, and others have offered
evidence of a significant, quantifiable risk to
portfolios exposed to fossil fuel assets in a carbon
constrained world. The leaders of several of the
largest institutions to divest in the past year
have cited climate risk to investment portfolios
as a key factor in their decisions. [Emphasis
Another reason the fossil fuel holdings are risky is that the companies are pouring the vast majority of their profits into expensive and environmentally dangerous projects to find more reserves. BP is again drilling in the Gulf of Mexico. Tar Sands fields are expanding in Canada. Shell recently halted their expensive explorations in the Arctic, but may continue it when oil prices rise again. What this means to individual shareholders, is that there is less money available for dividends. Potential expenses and fines for oil spills are very costly and hurt the bottom line.
As I told you above, The Rockefeller Brothers Fund has begun divesting from fossil fuels. According to CNN Money, “dumping” fossil fuels was a great move.
Oil prices have plunged from over $90 when the
fund made its announcement in September 2014
to $45 now -- the lowest level since the recession.
Big energy stocks have been clobbered. Energy is
by far the worst performing sector in the stock
market in 2015. Meanwhile, the climate change
divestment movement continues to gain momentum.
Rockefeller is no longer an outlier.
“We are able to show it can be done," says Rockefeller
Brothers Fund President Stephen Heintz, "without
causing harm to the overall performance of your
As you move your money out of fossil fuel companies, invest in sustainable clean energy companies. Support a low carbon future by reinvesting your money into the industries that will be good for our planet, good for our health, and might just make all the difference.
© The Issue Wonk, 2015