The Rapidly Growing Fossil Fuel Divestment Movement
There is a movement that has the potential to help the world reduce greenhouse gas emissions. That movement is the rapidly growing divestment from fossil fuels. More than 1,000 institutions that represent over $8 trillion in assets have committed to divestment. By the end of 2014, only 181 institutions with $50 billion worth of assets committed to divestment.
There are over 43 cities that have passed resolutions or ordinances to partially or fully divest from fossil fuels. New York City last year announced it would divest from fossil fuel reserve owners by 2022. New York City’s retirement system is the largest municipal pension system in the United States, controlling a total of USD 194 billion in investments.
Denver commits to fossil fuel divestment
The city of Denver, Colorado is the latest city to commit to divestment. Denver Mayor Michael Hancock recently announced that the city is divesting its $6 billion general funds’ portfolio from fossil fuel investments. Fossil fuels are only a small percentage of the city’s portfolio so the process of divestment can move quickly.
Mayor Hancock made the announcement at the 2019 Denver Mayoral Candidate Forum.
In March, Mayor Hancock announced that the city would liquidate all of the debt instruments issued by non-renewable energy companies in its reserve fund. By April, the city sold all associated debt instruments.
The divestment movement includes a broad range of sectors
The divestment pledges are from companies in 37 countries with over 65 percent of the commitments coming from outside the U.S. The commitments include cities, banks, insurance companies, large pension funds, faith groups, and cultural, health, and educational institutions. Last year, Ireland became the first country to pass legislation divesting its $10 billion sovereign pension fund. Since 2016, 61 pension funds have committed to divestment, and 138 institutions have committed to divestment.
The 1000th institution to commit to divestment is the French public financial institution responsible for managing public sector pensions, savings, and investments worth over $196 billion. Caisse des dépôts et consignations (CDC) recently announced that it will no longer invest in companies that make over 10 percent for their business from coal.
There are 15 insurers with over $4 trillion in assets that have committed to reducing investments from coal, according to a report by Unfriend Coal. In 2015, AXA became the first global insurer to reduce coal investment. The insurers are either divesting around $20 billion in equities and bonds from coal companies or stopping underwriting coal projects, which makes the projects uninsurable. Those 15 companies comprise about 13 percent of all assets managed by the global insurance industry.
Early reports suggest that some of the divestment announcements may have caused short-term decreases in the share prices of fossil fuel companies. A Goldman Sachs report from last year stated that “our global energy team believes that the coal divestment movement has been a key driver of the coal sector 60% derating over the past five years.”
Divestment can’t come fast enough
The divestment of fossil fuels can’t come fast enough. The report by Rainforest Action Network, Banking on Climate Change highlights that global banks poured $1.9 Trillion into fossil fuel financing since the adoption of the Paris Agreement. JPMorgan Chase and Wells Fargo are contributing the biggest amounts. Keeping global warming below 1.5 degrees Celsius is the goal that climate scientists say is needed to avoid the worst impacts of climate change. To achieve that, we need to create a world with much less dependence on fossil fuels.