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Abstract
This article charts the evolution of the divestment movement, a transnational advocacy network that uses a range of strategies to shame, pressure, facilitate, and encourage investors in general, and large institutional investors in particular, to relinquish their holdings of fossil fuel stocks in favour of climate-friendly alternatives. It describes the movement's central characteristics and the strategies it employs, it maps its basic architecture and the potential role it plays in the broader climate change regime complex, and shows how it represents a novel form of private investor-targeted climate change governance, operating primarily through symbolic political action and as a norm entrepreneur. Given the potential importance of the movement, the model it may provide for other forms of private governance, and the paucity of analysis of its implications for climate change mitigation, this article addresses an important descriptive and analytical gap in the climate policy literature.
Policy relevance
The early success and rapid growth of the divestment movement suggests it may play a significant role within the broader sphere of climate change policy. This article shows how the movement has used the aggregation, packaging, and dissemination of scientific fact and moral argument, and local and international campaigning, direct action, lobbying, and knowledge construction to steer the actions of investors. More broadly it demonstrates how shaming, persuasion, and empowerment can be used as strategies to bring about economic and political change and to catalyse the ‘energy revolution’ that many see as the essence of effective climate change mitigation. In so doing, the article indicates how climate policy can be advanced by novel forms of private governance, and (so its proponents would argue) how more might be achieved by unconventional means and leveraging the private sector than governments have managed by conventional means in some two decades.
Disclosure statement
No potential conflict of interest was reported by the authors.
Notes
1. The predominant source for legitimacy claims among the 60 transnational climate change initiatives studied by Bulkeley et al. (Citation2014) was expertise. We are not suggesting that the divestment movement has no expertise, just that this is not its main claim to legitimacy.
2. The extent to which the movement is engaged in governance might be the subject of argument. There are many definitions of governance, some quite broad, others more demanding (Burris et al., Citation2008). For the purpose of this article we take a broad view of governance as ‘the management of the course of events in the social system' (Burris et al., Citation2005, p. 30) towards a collective goal (Andonova et al., Citation2009).
3. An average temperature increase of not more than 2°C above pre-industrial levels has become international shorthand for what constitutes dangerous anthropogenic interference with the climate system, albeit there is increasing evidence that lower temperature increases may also cause extreme climate events. See Rogner et al. (Citation2007).
4. For one company's statement of intentions, see ‘Exxon Mobil says' in The Guardian (Citation2014). For an overview of the disparity between the intentions of major fossil fuel companies and what the science suggests is necessary to avert dangerous climate change (and as to the former's history of deception in this regard), see Union of Concerned Scientists (Citation2015).
5. April 2014 was the first month in recorded history where CO2 concentrations exceeded 400 ppm every day. The last time this level was reached is estimated to be at least 800,000 years ago (see Thompson, Citation2014).
6. In a 2014 report, a group of financial analysts called Fossil Free Indexes (see http://fossilfreeindexes.com/) updated the top 200 list, revealing that the reserves of oil, gas, and coal owned by these companies had grown by an estimated 8.4% since year-end 2010.
7. Ansar et al. (Citation2013, p. 2) list environment-related risks that can result in asset stranding: environmental challenges, changing resource landscapes, new government regulations, falling clean technology costs, evolving social norms and consumer behaviour, and litigation and changing statutory interpretations.
8. The need to keep carbon reserves unburned and ‘in the ground’ does not, of course, inevitably point to a strategy of divestment. A state-imposed carbon price, if sufficiently high, could have that effect. Similarly, it is not impossible that concerned shareholders could convince a company to return capital to shareholders in light of climate change risk, rather than make further investments in exploration (as Exxon shareholders recently requested), or even to abandon fossil fuels for renewables. Furthermore, claiming the existence of a carbon bubble strengthens the hand of divestment campaigners by raising the issue of asset stranding, but their moral arguments for not exploiting fossil fuel resources stand independently, whether or not there is credible evidence for a bubble.
9. Dorsey and Mott (Citation2014) see divestment ‘as a tool to confront the corporate powers that have taken our political system hostage.’ Ansar et al. (Citation2013) conclude that the direct impact of divestment on the valuation of a firm will depend on its market capitalisation and the size of divestment outflows. Divestment is unlikely to affect the long-term stock price, unless market norms also change to close down equity finance availability. However, some direct impact on coal stock prices may occur as coal stocks are less liquid than other fossil fuels and represent only a small part of market capitalisation. Moreover, if a divestment campaign influenced large banks, avenues for lending to fossil fuel companies might be constricted, particularly in developing countries.
10. Carbon Tracker (Citation2014) reports that state-owned companies have 35% of the potential production of oil to 2050, with private companies having 52%, and another 13% being in the hands of part-listed part-state companies (see Carbon Tracker, Citation2014).
11. According to Humphreys (Citation2013), college endowments have an average of less than 4% of their portfolios exposed to fossil fuel companies in public equity and fixed income options. The figures cited by Ansar et al. (2013, pp.58–59) are 2–3% for college endowments and 2–5% for public pension funds, with some extra exposure through debt instruments such as fossil fuel bonds.
12. It is difficult to estimate the impact that divestment of all fossil fuel holdings by endowments, pension funds, and other targets of the divestment campaign would have on the value of energy companies. The percentage of equity held by institutional investors in big energy companies can be large (e.g. ExxonMobil 51%; Peabody Energy 78%), but those figures relate to all institutional investors, including investment banks and investment management companies whose investments include pooled funds.
13. Cameron Fenton of the Canadian Youth Climate Coalition, quoted in Brooks (Citation2013).
14. Harmes (Citation2011) notes that the ability of fund managers to take longer-term climate risk into account is often limited by institutional structures that reinforce short-termism. Tracking error and high volatility against benchmark indices can result in the sacking of the responsible fund managers (Thamotheram, Citation2014).
15. Some of the biggest environmental NGOs, such as Conservation International, the Wildlife Conservation Society, the Nature Conservancy, and the World Wildlife Fund, still hold shares in fossil fuel companies through non-screened managed funds and mixed assets (Klein (Citation2013a, Citation2013b).
16. See ‘Oxford university academics … ' in BBC News Oxford (Citation2014) and Vidal (Citation2014). The open letter and a petition from staff, students, and alumni were submitted to the University administration on 1 June 2014 as part of a consultation by the university and were signed by many influential academics such as the former chief scientific adviser to the UK government. In March 2015, the University decided to defer a decision on divestment (Mathiesen, Citation2015), but just two months later ruled out future investments in coal and tar sands (Carrington, Citation2015c).
17. A few months later Stanford invested in three oil and gas companies, including one involved in fracking in the northeastern US. Campaigners from 350.org described this decision as not counter to Stanford's divestment decision, but not ‘in the spirit’ of it either (Streib, Citation2014).
18. This statement was made in October 2013 by the ANU's Chancellor about a University council decision to introduce a socially responsible investment policy (Macdonald, Citation2013).
19. This reaction provided a stark contrast to the response to Sydney University's earlier decision not to make further investments in the coal and consumable fuels subsector of the ASX (see Hannam, Citation2014; Vorrath, Citation2015).
20. Perhaps paradoxically, the wealth of the Fund comes from Norway's petroleum activities (Ministry of Finance Norway, n.d.).
21. These include collaborations for promoting and organising direct actions (such as the People's Climate Action March on 21 September 2014), partnerships to produce information, including research papers (Denniss, Pender, & Swann, Citation2014) and online resources for investors (such as Superswitch: see http://superswitch.org.au/super-fund/unisuper/) and joint public presentations.
22. See also the UN Principles for Responsible Investment (http://www.unpri.org/) and the London Principles of Sustainable Finance (https://www.forumforthefuture.org/sites/default/files/project/downloads/londonprinciplesexecutivesummary.pdf).
23. Richardson (Citation2013) suggests that reforms targeting fiduciary duties are needed to ensure that investment managers take into account not only shareholders’ interests but also public costs.
24. Former editor of The Guardian newspaper Alan Rusbridger established the ‘Keep it in the ground’ campaign in March 2015. It puts pressure on the Gates Foundation and Wellcome Trust, the largest and second largest charitable funds globally, to divest from the top 200 fossil fuel companies within five years and to immediately freeze any new investments in those companies.
25. For more about this campaign see Oreskes & Conway (Citation2010) and Union of Concerned Scientists (Citation2015).