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Green Is The New Black

Is divestment the secret to ending our fossil fuel addiction?

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It’s been an eventful few weeks for those of us fighting the fossil fuel industry. Not only did we see legal battles around the world against governments and Big Oil, taking them to task on the climate, but we also saw major shareholder showdowns and shakeups in Exxon and Chevron, and a bombshell report from the IEA on oil and gas to boot. A running thread amidst these wins is this: oil and gas are becoming increasingly unattractive. But why? How did we get here? Some are saying that divestment is the campaign that’s pushing these wins forward, so let’s explore…

 

Big wins to celebrate

This year’s been a year of quite a few ups and downs in the activism space. But as far as we’re concerned, the last few weeks have seen a number of big wins. Perhaps the win that’s stolen the show is the historic ruling in the Netherlands last week. A Dutch court ordered Royal Dutch Shell to cut its emissions by 45% from 2019 levels by 2030. This would mean that Shell would have to comply with the Paris agreement and take actual responsibility for its devastating impacts on climate. “Even if states do nothing or only a little,” Judge Alwin said in her decision, “companies have the responsibility to respect human rights.”

The ruling is “game-changing” according to climate activists. And though it’s only legally binding in the Netherlands (and Shell can appeal the decision), it could influence similar cases around the world. And it’s the first time ever a major energy company has been held accountable for its role in the climate crisis. Is the tide turning against oil and gas?

 

The tide is turning…

Other news suggests that this might just be the case. On the same day of the Dutch court ruling, a majority of ExxonMobil shareholders approved a pair of new corporate directors backed by Engine No 1. A firm that’s special, though it has a relatively small stake, because its goal is to get other shareholders to approve new board members to address what it’s saying is “Exxon’s failure to adapt to a changing world”. They point to Exxon’s poor financial performance to say that investors are paying for the company’s lack of climate action, and they want to change that. (Exxon, unlike other fossil fuel corporations, has been particularly insistent on its future continuing to be in oil and gas.)

Yet again, on the same day of the Dutch court ruling, Chevron shareholders too made significant decisions. They voted in favour of a proposal to cut “Scope 3” emissions. And though the proposal involves no targets, it certainly shows “growing investor frustration” with fossil fuel corporations.

So a judge ruled Shell guilty as charged for wrecking the climate. And Exxon and Chevron shareholders want their corporations to do more for the climate. And not forgetting, all of this is happening in the same month as the dropping of the “bombshell” IEA report, that says if we want to make good on our climate goals? There is no need for investment in new fossil fuel projects.

divestment green is the new black

IMAGE: via 350.org and Stop the Money Pipeline | IMAGE DESCRIPTION: A repeated black and white graphic of a person using a shovel to cut through a pipeline with dollar signs on it; the pipeline leads towards financial institutions and fossil fuel infrastructure, and connects from where the person is standing from—their feet are in the water, and in the water are flooded cars, buildings and homes; the words “STOP THE MONEY PIPELINE TO CLIMATE DESTRUCTION” are above and below the graphic

What does it all mean?

The short of this is that it’s no longer paying—literally—to be in the game for oil and gas. As NPR reported, “arguments about the financial implications of climate change — specifically, the possibility that the world will stop using oil and gas and investments in fossil fuels will not pay off — have moved firmly to the center of mainstream investor thinking.”

Jamie Henn, founder and director of Fossil Free Media, says that this mainstreaming “is thanks in large part to the work of fossil fuel divestment activists… who are targeting financial institutions for investing in fossil fuels… Amongst its many accomplishments, the divestment campaign has served as a massive educational initiative on climate finance and concepts like “stranded assets.” Without the years of outside pressure (and media coverage) that divestment activists have generated, I don’t think there’s any way that we would have seen the successes at Exxon and Chevron today.”

Indeed, as Shannon Osaka reports for Grist, “as sudden as the[se] events appeared, they’ve been in the works for many years. The first campaigns for divesting endowments of fossil fuels began to pop up on U.S. university campuses in 2011; since then, approximately $14 trillion in investments have been yanked from coal, oil, and gas around the globe.” Osaka also points to the “pile of investments in coal mines, oil production, and gas-powered cars that could be left stranded if the world begins a rapid shift to renewable energy and a low-carbon economy.”

 

Connecting the dots

To understand more about how it all connects, we spoke to Bertrand Seah. He’s the co-founder of the Green Swan Initiative, a new project that aims to map the sustainable finance landscape in Singapore. And he’s also big on divestment.

Seah tells Green Is The New Black: “If you’re looking only at the events of the past few weeks, it is actually the opposite of divestment that has been at the heart of the key developments in the fossil fuel industry.” He explains that with Exxon and Chevron especially, it’s not divestment per se. But instead, those who continue to invest in these companies making breakthroughs. Further, “the truly powerful and influential force that gave weight to such campaigns as Engine No 1’s are your institutional investors like Blackrock and Vanguard”, whose “decision to support the candidates… swung things in favour of the rebel shareholders.”

However, he adds, “if you zoom out a little and see the developments in their longer-term historical context,” here concurring with Henn and Osaka, “it is quite clear that the divestment movement’s role has been massive. The divestment movement was among the first to put sustained pressure on the role of the fossil fuel industry in causing global heating, and it was extremely prescient in pointing specifically at how the financial industry, which by this point (in the early 2000s) had become hegemonic in the global economy, played a key enabling role.”

“The fact that we have these shareholder resolutions demanding change, and the Blackrocks of the world are supporting them, shows how much climate change has become mainstreamed in the financial world.” If not actually making the money move, in other words, the divestment campaign is at least forcing investors to realise that they have much to lose, if nothing changes.

 

A sea change is coming?

Andrew Logan, head of oil and gas at nonprofit investor network Ceres, says that we can expect these big wins to follow with more concrete changes in the industry. “There’s a herd mentality in the investment sector,” he says.

This has been proven with research. Earlier this year, a group of scientists came together to come up with six “social tipping points” that could help us transition away from fossil fuels. One of them, of course, is the financial side of things. That is, if some investors start ditching fossil fuels, we might see an “avalanche effect”. More and more investors will follow. They would either divest or, like what we’re seeing with Exxon and Shell, demand changes to the fossil fuel corporations’ business models.

So these big wins, really, are not so much material changes right now. Rather, they’re symbolic. A signal, as Osaka puts it, “to the rest of the market, other big investors, and the companies themselves. Oil and gas is no longer a safe bet.” This is a signal that will hopefully set of other signals, and trigger a sea change at the end of it all. But it starts, of course, with laying the groundwork from now onwards. Luckily for us, some of that has been done already.

“The work that grassroots activists, Indigenous leaders, young people, and many more have done to turn the fossil fuel industry into the principal villain in this climate fight has been essential for creating the conditions for today’s wins,” Henn reiterates. Villanising the fossil fuel industry is but one of the global divestment movement’s aims—and divestment, Henn argues, is a key weapon in our fight against the industry.

 

What is “divestment”, and what is it doing?

It’s worth exploring here more in-depth what divestment is, and what the movement is doing. They’re not one and the same. Divestment, as explained in this short read by the Green Swan Initiative, “is the process of selling assets or subsidiaries (companies owned a parent company) in order for the parent company to realign itself with certain goals”.

Effectively, it’s the opposite of investment and happens when the assets or subsidiaries aren’t performing financially. Or when the company or institution has to, legally, based on regulatory action, or by shareholder demands on “ethical or social guidelines”. “In the grander scheme of things,” Green Swan Initiative explains, “divestment is simply a precursor towards a more sustainable portfolio.” It doesn’t necessarily mean that funds freed up will go into more sustainable avenues—more on that later—but it’s a start.

There are two ways in which activists are pushing for corporate change now, says Seah. “The first way you might call exit, which is to threaten to withdraw capital to those who don’t meet climate imperatives. This is where divestment [the action] falls under. The other one is where we’re seeing most of the change, which may be called voice, in other words using your shareholding as leverage to force through change. But these two come together to form something of a dialectical whole.”

 

Pressure from all sides

And the divestment campaign, as Seah, Henn and Osaka all allude to, does help the voice side of things too. We also spoke to Jackie Fielder, who heads up Communications at Stop the Money Pipeline. Stop the Money Pipeline is a coalition of over 160 different organisations working to hold Wall Street accountable for their investments. She explains that their divestment campaign is engaging from all kinds of angles. “Our campaigns [run the gamut of] demanding that banks, asset managers, insurance companies and institutional investors stop funding, end sharing and investing in climate destruction.”

So on the one hand, they’re pressuring people who have their money in fossil fuels to pull out. But to do that, they’re also involved in highlighting the fact that fossil fuels—and the expansion of such projects—violate human rights, Indigenous rights, sovereignty, and our environment. (In telling the truth about fossil fuels, the campaign exposes how these institutions who finance fossil fuels, don’t have public interest in mind, hence these institutions will want to pull out.) What that does too, however, is also pressure those who own shares to get the fossil fuel industry to change… from the inside.

Seah rightly points out that in doing so, “big finance, be it banks or asset managers, have emerged as unlikely allies in the climate fight. The Blackrocks of the world are no Greta Thunberg, and they are not by any means anti-capitalism.” Fielder adds that she thinks “they go where the money goes”. All of this makes climate activists’ positions a little more complex.

“What will the political limits of these actors be for the climate movement?” Seah asks. It’s a “massive question in itself, but they are nonetheless a key part in putting the death knell to the fossil fuel industry.”

 

Not a perfect solution

Assaad Razzouk is an expert on all things renewable energy. He’s better known as The Angry Clean Energy Guy, and shares with Green Is The New Black that the divestment movement has definitely impacted the industry. As far as PR is concerned. Especially with these high-profile wins we’ve been seeing. But, he caveats, there’s much more we need to be doing, that divestment doesn’t do. “What are the objectives, right? To effect change, you’ve got to price carbon effectively, and you have to make people pay the price, for their greenhouse gas emissions and other environmental destruction.”

“Divestment,” he says, is “kind of the first step.” Especially when it comes to moving the money towards renewable energy. Because, Razzouk explains, transitioning towards renewable energy is about addressing issues of cost, logistics, and more. The divestment movement, in his opinion, is a big “enabler”. But it doesn’t have all the answers. And even if, he says, “you sell something [the stocks]”, “it doesn’t mean you’re going to buy the opposite of that something.” In other words, even if shareholders move their money away from fossil fuels, it doesn’t mean that they’ll move it towards renewable sources instead.

Razzouk adds that what we want to focus on (too) is actions that decrease emissions. Now, the divestment movement does impact this indirectly. And if the industry’s funds dry up, then the industry shouldn’t be able to run. But we also need, Razzouk says, the shareholders who own their shares to change from the inside. (This speaks, again, to what Seah shared about the two ways of pushing for corporate change.) We need them as allies, to get these fossil fuel corporations to change.

 

What about Asia?

Razzouk notes that in Asia, we’re seeing “net-zero announcements in China and Japan, and South Korea”. And “with Indonesia basically exiting new coal”, we might not necessarily have to focus on divestment. Because people are kind of divesting anyway. The cost of capital of oil, gas, and coal, is going up. Divestment has kind of done its job.” He also shares that because of cultural reasons, it doesn’t seem like the divestment movement will take off in the same way it has in the West. Instead of the divestment campaign, he says, we should look at implementing policies to reduce emissions.

Seah agrees that cultural differences matter, yes. (A few caveats here. One being that Asia is incredibly diverse. And another being that there are other differences. Like how unlike in the West, many oil producers in Asia are directly state-owned.) He explains that the Exxon and Chevron cases happened in a country “where finance is hegemonic and government regulation on climate change is oftentimes non-existent.” With the Shell case, “the courts [were] the vehicle through which change is fought over. Underpinning these are features such as the rule of law, human rights, or certain notions of intergenerational equity that aren’t always present in Asian jurisdictions.”

In other words, we can’t expect the exact same kinds of wins that we saw in the West to happen here.

 

All of the above?

But what if the answer was not one or the other… but rather all of the above? All of the above being said, we can’t rule out the divestment movement in Asia just yet. As Seah says: “For better or worse, corporate and financial actors have started to take climate change seriously, but it remains inextricably tied to the role it has already played in causing the climate crisis. The end result is an often disorienting cocktail of grandstanding proclamations, genuinely positive developments, and cynical greenwashing.”

So Seah is saying that we need the divestment movement to help cut through that mess. Above all: “The movement to divest from fossil fuels will be crucial in holding massively wealthy and powerful actors accountable in some form in our green transition.”

 

What can you do?

If the answer is all of the above, then we’d better get to work. The divestment movement has proven to be a long-term fight. A fight that many are already a part of, all over the world. It’s part of the grander fight that all climate coalitions, justice organisations, activist networks are a part of. It’s a fight to hold the most powerful, the most destructive, accountable for the damage they’ve done. Again, luckily for us, we don’t have to lay the groundwork. And also luckily for us, we’re seeing the fight pay off.

How can you join the movement? Look out for your local divestment campaign. It can be anywhere from your bank, to your insurance company, to your workplace, to your school. Get involved with the work on the ground, with whatever skills you have. Learn about how you can put pressure on the institutions you’re affiliated with (or leading perhaps), to do more for the climate. Follow the trail of where your money is going. When in doubt, the answer is probably that your money is going to fossil fuels. Because that’s the status quo.

Divestment is, as we’ve discussed, not a perfect solution. So if you’re not convinced that it’s important, there are many other ways to get involved to hold fossil fuel corporations accountable. It starts, of course, with realising and remembering that, they’re the ones responsible. (Don’t let them convince you otherwise.) And then you can start to figure out how you can leverage your position to bring about change that holds them accountable. If you’re reading this, you’re probably in a position somewhere to hold some major institution, corporation, or government more accountable. We need you in this, so start where you are.

 

FEATURED IMAGE: via Harrison Haines from Pexels | IMAGE DESCRIPTION: Two rusty and abandoned petrol pumps by the sea 

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Tammy (she/her) is an activist-in-progress and digital creator and communicator, based in sunny, tropical Singapore. Her mission is three-fold: (1) to make climate justice activism and theory more accessible; (2) to create digital and physical community and learning spaces towards a more just, regenerative, and loving world within our current one; (3) and to mobilise the best parts of social media in service of all this.

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