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Motion example: long Avoiding financial risk and tackling climate change through fossil fuel divestment Context We humans are altering the climate system rapidly and irreversibly with the greenhouse gases we produce. The primary driver of climate change is burning fossil fuels coal, oil and natural gas. The consequences may be dramatic: for example rising seas, extreme weather, spreading diseases, increasing hunger and more refugees. To avoid the worst damages and risks, the world community has agreed to keep warming well below two degrees and to pursue efforts to limit it only to 1.5 degrees. To do so, the overwhelming part of coal, oil, and gas reserves must be left in the ground rather than extracted and used. According to a joint study by Carbon Tracker and the London School of Economics, a third of oil reserves, half of gas reserves and more than 80% of the world’s coal reserves must remain in the ground to limit warming to two degrees. While phasing out the use of fossil fuels, we have to phase in investment in a zero-carbon energy system. Divesting from fossil fuel companies makes economic sense. Climate commitments mean that large parts of the fossil fuel reserves the industry currently holds cannot be used, making them essentially stranded assets. When this so called carbon bubble bursts, the fossil fuel companies will suffer which will have an impact on their share prices and profits. Investing in the fossil industry after the Paris Agreement is a financial risk not worth taking. Withdrawing money from the fossil industry is also a moral choice. If causing climate change is ethically questionable, then financing and trying to profit from causing it is doubly so. We want our community to play a part in solving climate change, not accelerating it. Resolution Against this background, the Council decides 1. The Administration is commissioned to submit a report on the guidelines currently in place for investments (including subsidiaries, foundations, etc.). 2. The Administration is also commissioned to report whether, and if so to what extent, money has been invested in companies, either directly or through funds, whose main area of activity is coal/fossil fuels [choose one]. 3. Based on the analysis of current guidelines and investments, the Administration is asked to submit an updated investment guideline for communal financial reserves for decisionmaking. Where legally permitted, these guidelines should also apply to municipal investments and subsidiary companies. 4. The administration is asked to identify ways how and to which date investments in fossil fuel/coal [choose one] companies can be gradually phased out and finally withdrawn. 5. Over the medium term, the financial management seeks forms of investment that pursue sustainability and ethical principles that go further. Background Being consistent with climate commitments Our community has committed to tackling climate change and promoting sustainable development. Continuing to financially support fossil fuels or allowing financial institutions to do so on a massive scale would be inconsistent with these commitments. Reducing risk from exposure to the carbon bubble Investment in fossil fuels is increasingly risky – the next financial crisis could start with the carbon bubble. A study commissioned by HSBC estimates that companies active in the fossil fuel industry could lose between 40 and 60% of their value when investors become aware that their reserves cannot be used or cannot increase in value. The decrease in economic activity and in the stock-market value will affect anyone who has invested in these companies, including local governments. Directing resources to sustainable investments World energy production remains overwhelmingly dominated by fossil fuels. Resources dedicated to fossil fuels are not available for sustainable alternatives such as renewable energy and energy efficiency. Joining a global community for change A growing number of local governments has decided to divest from the fossil fuel industry. These include for example Berlin, Bordeaux, Copenhagen, Oslo, Oxford and Stockholm in Europe, San Francisco, Seattle and Portland in the United States and many other cities in the rest of the world. Other notable examples include the pension fund of Norway, the University of Glasgow, three Danish pension funds, Stanford University and the Church of Sweden.