To Divest or Not to Divest: That Is The Question

by Ana Marta Laranjeira

source: http://gofossilfree.org/

source: http://gofossilfree.org/

Starting off by laying everything in simple terms, to divest is, quite simply, the opposite to invest.

Divestment campaigns are certainly no novelty, with tremendous examples in history such as the boycott to South Africa during the Apartheid. These movements are typically used as a tool to incite social and political change by, not only diminishing the financial power of a certain institution, but also by raising the society’s awareness on the problem being dealt with.

It is that exact concept that sets the base for the Fossil Free campaign. Aiming to get institutions at a global scale to remove all of their investments from any kind of fossil fuel companies, 503 institutions have already taken part (e.g. Rockefeller Brothers Fund, University of Oxford, Guardian Member Group) and approximately $3.4 trillion have been divested to the date of this publication.

Started in 2014, this grassroots movement has swiftly rose to popularity, having been reported to be the fastest growing divestment campaign ever in History and with a mounting number of supporters such as Ban Ki-moon (Secretary-General of the United Nations) alongside the UN’s team responsible for the climate framework, Leonardo DiCaprio, Desmond Tutu, Al Gore, amongst others.

Nevertheless, popularity tends to walk hand-in-hand with objection and opposing ideas invariably arouse debates, which brings us to the million-dollar question: to divest or not to divest?

Generally speaking, the contending side to the Fossil Free campaign has its main focus on the more direct impacts, the most obvious ones being the financial.

It is stated that, economically, it makes no sense for an institution to let go of its shares and freeze all investment on fossil fuel companies as, hypothetically, some other investor would follow-up and buy those exact same shares. Assuming that this happened, in terms of profitability this could potentially jeopardise the institutions divesting more than the actual fossil fuel companies. As a matter of fact it’s been reported by Welch and Wazzan (1999) that the boycott to South Africa had little impact on the country’s economy, possibly due to this. Nonetheless, the two add that the movement did have an impact on Apartheid, believing that it’s linked with the social/political opposition rather than the economical front.

Furthermore, some opponents defend that the campaign spreads the wrong idea to the population, that by divesting “we have done our part”, when this “part” is actually not enough. Divestment won’t change the dependence on these fuels, consumer demand will. Yet, consumers cannot fully shift away from fossil fuels due to the lack of concrete alternatives available, with renewable energies still failing to perform due to their insufficient technological development, possibly linked with a shortage of investment in this area.

On the other hand, most supporters believe that these perspectives seem to miss the bigger goal embedded on this movement. There doesn’t seem to be any feasible way of completely extinguishing all of the profits of the fossil fuel companies in the short run, and surely divestment won’t do it either. Nonetheless, when a large number of institutions agree on comprehensively divesting from this industry, it should affect the public image of the overall sector. As easy as it may be to replace investors, it is a completely different story when it comes to gaining back reputation. This should lead to a loop effect as, impoverished reputation results in reduced economical appeal and, consequently, fewer investors willing to allocate capital on such companies.

What’s more, and coming back to a point that seems central to this matter, movements like this instigate social alertness. Although most of the statements arising from this debate seem to pose as mere assumptions, with hubs already spread throughout the five continents, the commitment of hundreds of institutions, public demonstrations all over the world and growing popularity on the political and social fronts, the point of public awareness has moved on from assumption to fact.

“Protesting” can be quite a tricky task, with numerous activists struggling to capture the public’s attention to their causes, no matter how noble they may be. Fossil Free seems to be doing so, which is noteworthy. Information on climate change, fossil fuels and renewable energy has long been available to everyone thanks to Google search, and a little extra reading. The predisposition for doing so, in many cases, has not. Further awareness leads to further knowledge, discussion and community engagement which ultimately are legitimate forces in engendering change.

In conclusion, it is important to understand that divesting really isn’t an immediate solution to climate change. Removing investment from fossil fuels doesn’t result in consequent investment on renewable energies (although that should, perhaps, be a viable exchange). Investing in research and development on the clean energy sector is, more than ever, of paramount importance. Still, we cannot let perfect be the enemy of good. Movements as such get people talking, debating and learning more on the topic. Social engagement generates strong communities that do have the power to incite change: public pressure inflicts political action and dissatisfied consumers force market adaptation.

Fossil Free doesn’t seem to be slowing down anytime soon and – whether you support it or not – it’s certainly a movement to keep an eye on in the years to come.