“We are working hard to become the world’s first CO2 neutral capital in 2025. Therefore it seems totally wrong for the municipality to still be investing in oil, coal and gas. We must change that.” Those are the words of Copenhagen’s mayor Frank Jensen when he announced that the Danish capital would pull its funds out of fossil fuel companies. Divestment – as it’s called – is quite simply the opposite of an investment. It means to blacklist investments in certain sectors such as the tobacco industry or in this case, the world’s biggest fossil fuel companies.
Copenhagen is far from alone in taking this step. In the last year, a whole range of European capital cities decided to cut their financial ties to the companies whose business model is driving us into irreversible climate chaos. Paris, Berlin, URBACT cities Oslo and Stockholm, and around 100 other cities, towns and villages have all decided to cut their financial ties to Shell, Exxon, Total, Coal India and the like.
Divestment won’t bankrupt the fossil fuel industry financially. What it can do however, is to bankrupt them morally, thereby weaken their political influence and have a shot at creating enough space for action on climate change. The stigmatisation power of divestment has been attested by a study from Oxford University.
Cities that decide to divest frequently cite the incompatibility of fossil fuel investments with their goals to reduce emissions and tackle climate change. Örebro in Sweden for instance is working towards becoming a fossil-free municipality. Mayor Lena Baastad commented their decision to divest from fossil fuel companies, saying, “We need to take action on climate change on various levels. Our efforts are more meaningful, when we ensure that our financial assets don’t work in the opposite direction.”
It’s not just cities. Investors as diverse as the British Medical Association, the World Council of Churches, the Rockefeller Brothers Fund, heirs to John D. Rockefeller’s oil fortune, universities and pension funds all turn their backs on the fossil fuel industry. Even the world’s largest insurance company, Allianz, and the massive Norwegian Sovereign Wealth Fund have started to pull their holdings out of coal. For a list of all 600 fossil fuel divestment commitments, go to gofossilfree.org/commitments/.
Not a minute too soon
These moves don’t come a minute too soon. Climate change is already hitting us more severely than scientists predicted. Each of the last 16 consecutive months have been the hottest in history. Mass coral die-offs, deadly heat waves, art having to be rescued from the floods submerging Le Louvre museum in Paris and many other events we are witnessing give us a chilling vision of life in a warming world.
Through the Paris Climate Agreement, world governments promise to take action to stay ‘well below’ that 2C of global warming, aspiring to keep closer to a 1.5C rise. Even for a chance to keep global warming from reaching the upper limit, a recent report from Oil Change International showed that just the currently operating coal mines and oil and gas fields cannot run until the end of their projected lifetimes.
Nevertheless, the fossil fuel industry is still determined to burn through as much coal, oil and gas as they can. Instead of phasing out existing projects, they spend billions every year looking for yet more reserves to develop, use their lobbying might to block meaningful climate action. Many of them have spent decades spreading deception and doubt about climate change. The business model of these companies is in no way compatible with a safe climate. That’s why more and more cities no longer want to support them through the public money they are entrusted with on behalf of their citizens.
A matter of financial resilience
Besides the moral urgency to withdraw support from an industry pushing us into climate chaos, divestment is also a matter of financial resilience to climate change. Financial players from the Bank of England to Bloomberg warn of a ‘carbon bubble’, similar to the housing bubble. The vast majority of the coal, oil and gas reserves fossil fuel companies claim in their books, cannot be developed under any scenario where some action to limit global warming is taken – or simply because they will no longer be economically viable.
Oslo City Councillor Lan Marie Nguyen Berg referred to the financial considerations that played into their decision to divest, saying, “Heavy investments in fossil fuels is a huge risk when we know that the majority of fossil fuels must remain in the ground to avoid catastrophic climate change. The Norwegian economy is already experiencing the downsides of being dependent on fossil fuel exports, with unemployment rates rising following the drop in oil prices, and investment costs rising sharply on the Norwegian shelf. This policy change will protect our pensions from being invested in stranded assets.”
Instead of investing in reckless fossil fuel giants, cities that divest frequently choose to put the money into eco-ethical funds and projects that render local benefits instead. Bristol in the UK for example invested in its own wind farm. Indira Norton, Energy Management Officer for Bristol City Council said that the investment will “build a strong and secure local production capacity that will help to protect the local authority and their taxpayers from future energy crises, as well as making a useful contribution to renewables on a national scale. It also makes good financial sense too, creating a lucrative new income stream that can be used to finance other energy or environmental projects.”
For more information about the global fossil fuel divestment movement Fossil Free, visit gofossilfree.org.
Watch the short video by The Guardian: What is fossil fuel divestment and why does it matter.
