Mercedes Mullins
Fossil fuel divestment is an attempt to reduce climate change by exerting social, political, and economic pressure for the institutional divestment of assets, including stocks, bonds, and other financial instruments connected to companies involved in extracting fossil fuels. As of December 2023, more than 1,600 institutions holding over $40 trillion in assets have divested from fossil fuels, with faith-based organizations comprising the largest group at about 35% of the total. The success of the divestment movement has been driven by people power, with local groups pressuring their representatives to pull out of fossil fuels. This movement has resulted in a significant increase in the cost of capital for funding new fossil fuel projects, making it more difficult for oil companies to raise financing amid rising ESG and sustainability concerns.
| Characteristics | Values |
|---|---|
| Total amount divested from fossil fuels | $11 trillion |
| Number of institutions divesting | 1,600+ |
| Amount held in assets by institutions divesting | $40.6 trillion |
| Types of institutions divesting | Universities, pension funds, governments, sovereign wealth funds, banks, global asset managers, insurance companies, cities, health care organizations, faith groups, foundations |
| Reasons for divesting | Aligning investments with core values, combating the fossil fuel industry, protecting portfolios from climate-related financial risk |
| Impact of divestment | Positive impact on investors' returns, reduction in carbon emissions, acceleration of renewable energy transition |
| Notable examples of divestment | University of Washington ($6 billion by 2027), Rockefeller Brothers Fund ($60 million), Catholic Church ($40 billion) |
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What You'll Learn
Student activism
One notable example of student activism is the Fossil Fuel Divest Harvard campaign, which, after a nine-year battle, succeeded in pushing Harvard University to divest its $42 billion endowment from fossil fuel companies. This victory set a precedent and inspired similar movements across the country.
Another prominent student-led initiative is Fossil Free Penn, a youth-led organization at the University of Pennsylvania that has been demanding an end to the university's investment in fossil fuels. In April 2022, Fossil Free Penn staged a six-day encampment on the College Green, partnering with local movements for housing and education justice. Their demands included divestment from the fossil fuel industry and investment in the local community. This occupation sparked interest and solidarity among the student body and marked the beginning of a series of youth-led occupations at colleges nationwide.
In addition to Harvard and the University of Pennsylvania, students at other prestigious universities have also taken a stand against fossil fuel investments. Students from the University of Chicago, Tufts University, Pomona College, Washington University in St. Louis, and Pennsylvania State University filed legal complaints accusing their colleges of violating their obligations as non-profit organizations by investing in coal, oil, and gas companies. These filings garnered support from faculty, staff, alumni, and climate-focused groups, and led to commitments from universities like Stanford, Cornell, and Boston University to divest from fossil fuels.
The impact of student activism extends beyond individual universities. As of September 2023, the Global Fossil Fuel Divestment Commitments Database recorded that education institutions made up 15.5% of the 1,552 institutions globally divesting from fossil fuels, with an approximate total value of $40.5 trillion. This demonstrates the significant financial impact that student-led movements have had on the fossil fuel industry.
Student activists have recognized that divestment is not just about financial decisions but also about challenging the "social license to operate" granted to fossil fuel companies. Their efforts have brought attention to the incongruence between universities' claims of climate leadership and their financial contributions to the climate crisis. By demanding divestment, students are not only advocating for environmental justice but also holding educational institutions accountable to their communities and the public interest.
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Faith-based organisations
Faith-based organizations have been at the forefront of the movement to divest from fossil fuels. As of March 2022, 34.4% of institutions that had committed to divesting from fossil fuels globally were faith-based organizations, making them the largest group to have divested. This trend is driven by increasing public awareness about the impact of fossil fuel production on the climate and the planet.
Faith communities have called on US banks to cease financing fossil fuel projects, citing the destructive impact of these projects on life-giving climate systems. In October 2017, 98 religious and ethical organizations and individuals urged five major US banks, including Bank of America, Citibank, and JPMorgan Chase, to stop financing fossil fuels. They argued that continuing to support these projects was "'irrational' and 'immoral'".
The fossil fuel divestment movement has also gained momentum within specific faith groups. For example, 122 Catholic institutions worldwide have either completely divested or are in the process of doing so. In 2022, the Diocese of San Diego and all of its affiliates totally divested from all direct and indirect fossil fuel investments. This decision was driven by the diocese's environmental goals and the desire to align its investments with the Holy See's social and environmental objectives.
The efforts of faith-based organizations have contributed to the global fossil fuel divestment movement surpassing 1600+ commitments. This movement spans every sector of society, including educational institutions, public pension funds, healthcare groups, governments, nonprofits, and cultural institutions. As of December 2023, institutions representing $40.6 trillion in assets have committed to cutting ties with fossil fuels.
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Universities
Fossil fuel divestment campaigns have been gaining traction at colleges and universities worldwide since 2011, with students urging their administrations to turn endowment investments in the fossil fuel industry into investments in clean energy and communities most impacted by climate change.
Unity College in Maine became the first institution of higher learning to divest its endowment from fossil fuels in 2012, limiting investments to less than 1% of its endowment. Since then, the movement has grown rapidly, with over 140 US higher education institutions (HEIs) announcing divestment commitments, either fully or partially. As of July 2023, more than 1593 institutions worldwide with assets totalling more than $40.5 trillion had begun or committed to some form of divestment of fossil fuels.
In the UK, the University of Glasgow became the first university to divest in October 2014, and was soon followed by major divestments at institutions including Warwick, Sheffield, King's College London, Edinburgh, and Durham. As of 2020, more than half of UK universities (77 universities) had committed to divest from fossil fuel companies.
In the US, notable universities that have committed to divestment include New York University (NYU), which currently owns no public securities in the fossil fuel industry and will avoid direct investment and reduce indirect exposure. Other universities include California State University (CSU), which reduced its fossil fuel exposure from 3% to less than 1% of its $5.2 billion endowment. Harvard University also committed to divestment from fossil fuels in 2021 after facing a legal complaint asserting that its investments violated state laws.
The University of Toronto, Canada, initially rejected a recommendation to divest from fossil fuels in 2016 but announced its plan to divest by 2030 following continued pressure from students and activists.
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Governments
As of 2022, global fossil fuel divestment commitments have reached over $14.5 trillion, with governments playing a crucial role in driving this shift towards a more sustainable economy. Here's how governments are leading the charge:
Government Divestment Initiatives:
Many governments have taken proactive measures to divest their assets and funds from fossil fuel industries. For example, the Norwegian government made headlines in 2020 when it announced plans to divest its sovereign wealth fund, worth over $1 trillion, from fossil fuels. This move set a precedent for other governments to follow suit. Similarly, the Swedish government has also divested its pension funds from fossil fuels, demonstrating a commitment to aligning its investments with international climate goals.
Policy and Legislative Action:
Green Recovery and Stimulus Packages:
In the wake of the COVID-19 pandemic, governments worldwide have allocated significant funds towards economic recovery. Many countries have seized this opportunity to promote a green recovery, channeling stimulus money into renewable energy projects and sustainable infrastructure. By doing so, they are not only boosting their economies but also accelerating the transition away from fossil fuels.
International Collaboration:
Alignment with Climate Goals:
Leading by Example:
Finally, governments are using their influence and purchasing power to drive change. By divesting their own assets and funds, they are demonstrating leadership and setting an example for other institutions and investors to follow. This sends a clear message that fossil fuels are becoming a risky investment, while clean energy alternatives offer a more sustainable and profitable future.
In conclusion, governments are playing a pivotal role in driving fossil fuel divestment and accelerating the global energy transition. Through a combination of divestment initiatives, policy actions, green recovery plans, international collaboration, and alignment with climate goals, governments are sending a strong signal to the market and influencing investment trends. Their actions are not only shaping the future of energy but also helping to build a more sustainable and resilient economy for generations to come.
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Fossil fuel divestment campaigns
The campaigns first emerged on college and university campuses in the United States in 2011, with students urging their administrations to invest in clean energy and communities impacted by climate change. Unity College in Maine became the first institution of higher learning to divest from fossil fuels in 2012. Since then, the movement has spread globally, with campaigns targeting the fossil fuel industry's harmful practices and environmental impact.
One of the most prominent divestment campaigns is the Go Fossil Free campaign, which provides resources and support to individuals and organizations committed to fossil fuel divestment. The campaign has been particularly influential on college campuses, with students leading the charge against fossil fuel investments. In 2019, for example, a student-led group at MIT restarted the divestment campaign, engaging the administration in a public dialogue about the effectiveness of their climate action plan.
Fossil fuel divestment is driven by both moral and financial motivations. Morally, it is based on the belief that profiting from damaging the planet is wrong, especially when the impacts disproportionately affect those who have benefited the least from fossil fuel use. Financially, divestment is seen as a way to protect portfolios from climate-related risks and improve returns. Research suggests that fossil fuel divestment has positively impacted investors' returns over the long term.
The success of fossil fuel divestment campaigns has been met with both support and criticism. Supporters argue that it helps break the hold of the fossil fuel industry on the economy and governments, while critics, including those from the fossil fuel industry, claim that divestment does not necessarily reduce demand for fossil fuels. Despite the criticism, the campaigns have gained significant traction, with institutions and individuals committing to divestment, sending a powerful message for change.
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Frequently asked questions
As of December 2023, more than 1,600 institutions holding over $40 trillion in assets have divested from fossil fuels.
Institutions divesting from fossil fuels include universities, pension funds, governments, faith-based organisations, philanthropic foundations, and for-profit corporations.
There are several reasons why institutions choose to divest from fossil fuels. Some see it as a way to align their investments with their core values, combat the fossil fuel industry, or protect their portfolios from climate-related financial risks.
Fossil fuel divestment has made it more difficult for companies in the industry to raise financing due to rising ESG and sustainability concerns. The "cost of capital" for funding new fossil fuel projects has increased steeply in the last decade.
Notable fossil fuel divestment campaigns include the efforts led by students at universities such as MIT, ANU, Harvard, and Boston University. Additionally, organisations like Stand.earth, the Sierra Club, and the Catholic Church have also played a significant role in the divestment movement.
