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DIVESTING EFFECTIVELY
Increasing the Impact of the Fossil Fuel
Divestment Movement
REPORT COMPILED BY JINGTIAN CHEN
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WITH RESEARCH FROM:
Zoe Carmichael, Jingtian Chen, Ellen Clarke, Daniel Harris, Joe Kidson, Elissa Li,
Luca Nazzicone, Timo Maas, Ridwan Sanad, Richa Sinha, Youpeng Tang
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PUBLISHED ON 24 FEBRUARY 2016
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DIVESTING EFFECTIVELY:
Increasing the Impact of the Fossil Fuel
Divestment Movement
THIS REPORT WAS COORDINATED AND COMPILED BY JINGTIAN CHEN
PUBLISHED ON 24 FEBURARY 2016
ACKNOWLEDGEMENTS
This report was written by a team of Oxford University students: Zoe Carmichael,
Jingtian Chen, Ellen Clarke, Daniel Harris, Joe Kidson, Elissa Li, Luca Nazzicone,
Timo Maas, Ridwan Sanad, Richa Sinha, and Youpeng Tang. The interviews were
conducted by Zoe Carmichael, Jingtian Chen, Ellen Clarke, Daniel Harris, Joe
Kidson, Luca Nazzicone, Ridwan Sanad, and Richa Sinha. Operational support was
provided by committee members Cristian Leata, Natascha Eichinger, Rachael Midlen
and Iftikhar Latif. The report was edited by Jingtian Chen and Natascha Eichinger.
We would also like to thank Helene Winch for her comments and our interviewees for
their help during the project. This report represents our views only and any fault is, of
course, entirely ours.
In addition, we thank the Oxford Hub for their continued support of OxPolicy.
ABOUT OXPOLICY
OxPolicy is a student-run think tank based in Oxford. We are linked with the Oxford
Hub, and seek to bring together different elements of the university and local
community to produce inter-disciplinary work and generate a fresh perspective on
policy work. We aim to engage people in the policy process, educate people on
pressing social issues, and empower voices that would otherwise have little influence.
Our reports and events provide concise overviews of complex issues and outline
practical, implementable solutions. We are structurally and operationally independent
of the University and our sponsors. As such the views expressed in this summary and
in the paper are our own, and do not necessarily reflect those of the Oxford Hub as a
whole, or of our sponsors. OxPolicy can be contacted at [email protected].
THIS REPORT IS ALSO AVAILABLE ONLINE OR BY REQUEST.
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Table of Contents
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Executive Summary
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Explanatory Notes
4
Introduction
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Section 1 Effects of the Divestment Movement
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1.1 Economic Effects
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1.2 Stigmatisation
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Section 2 Recommendations: Divestment in Itself
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2.1 Deepening Divestment: Divest and Re-invest
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2.2 Beyond Divestment: Local Carbon Pricing Initiatives
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Section 3 Recommendations: Divestment and Policy Change
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3.1 Public Mobilisation
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3.2 Engaging the Academia and Conventional Institutions
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Conclusion
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Executive Summary
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This report evaluates the effects of the fossil fuel divestment movement and identifies practices
with which the divestment movement can have the largest impact in connecting with the wider
climate change movement to tackle climate change.
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This report finds that the divestment movement is unlikely to have a big effect on the share prices
of fossil fuel companies but the stigma generated by the movement may make policy change
more possible. Based on the consideration of its current impact, this report also proposes the
following the recommendations for divestment campaign groups at various levels:
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1. Incorporate the demand that organisations should reinvest the money currently in fossil fuel
companies into (i) renewable energy or (ii) energy efficiency projects through Green
Revolving Funds, Green Bonds or other energy-related Socially Responsible Investment
(SRI) funds.
2. Sharpen the messages of the divestment movement in the following ways to mobilise public
support more effectively:
(i) Highlight the contrast between public support and government policy regarding fossil fuel
industry and renewable energy, and suggest that politicians have only been accountable to
the fossil fuel industry instead of the electorate. Statistics on fossil fuel companies’
lobbying spending can also strengthen this message.
(ii) Include a positive frame into the movement through the added focus on “Re-investment”,
contrasting green growth against “dirty oil” and point out that we can move from
dependence on fossil fuel to a greener future by “divesting” from fossil fuels and “reinvesting” into renewable energy and energy efficiency projects.
3. Engage more actively with the academic staff at their institutions, especially those engaged in
relevant research, and when circumstances permit, encourage academic staff to take part in
negotiation with the universities; and work with research programmes on stranded assets in
influencing conventional institutions to get their support and push for relevant regulations.
4. Consider innovative carbon pricing schemes as either (i) the next step of the campaigns for
those already successful at pressuring for full divestment ; or (ii) an alternative approach for
institutions that have been consistently reluctant in divesting.
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Through incorporating the element of “Re-investment” and calls for carbon pricing schemes, the
divestment movement can have a wide range of meaningful effects in supporting renewable
energy, decreasing the climate impact of existing organisations and making more possible nationwide policies on carbon pricing. Sharpening the messages of the movement can increase the
salience of environmental issues by emphasising the series of contrast between public support
and government policy, and between the positive frame of “Re-investing” and the negative frame
of divesting from the fossil fuel industry. Influencing conventional institutions through engaging
with the academia can also help bring about pivotal changes in regulation and climate risks
perception.
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Explanatory Notes
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Bond market: the bond market is a financial market in which the issuance and trading of debt
securities occurs. Debt securities are generally issued for a fixed term and redeemable by the
issuer at the end of that term, and include corporate bonds, government bonds, money market
instruments, etc. The primary goal for the existence of the bond market is to provide long-term
funding for public and private expenditures. A bond market is different from an equity market.
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Business-As-Usual (BAU) Approach: a Business-As-Usual approach continues the current trend
regarding the production and consumption of energy, and more specifically fossil fuels.
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Equity market: the equity market is also called a stock market, or a share market. It is a financial
market in which investors buy and sell equity securities issued by corporations. Equity securities
are shares of equity interest in an entity such as the capital stock of a company, trust or
partnership.
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Market capitalisation: market capitalisation of a corporation is the total market value of the
shares outstanding of a publicly traded company; it is equal to the share price times the number of
shares outstanding. Shares outstanding are all the shares of a corporation or financial asset that
have been authorised, issued and purchased and held by investors.
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Organisational stigma: organisational stigma is a devalued status attached to a specific category
of organisations within a particular social context.
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Retail Price Index (RPI): RPI is a measure of inflation published monthly by the Office for
National Statistics in the U.K. that measures the change in the cost of a representative sample of
retail goods and services.
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Shareholder engagement: shareholder engagement is a strategy used to open channels of
communication between a shareholder and a company to improve the environmental, social and
governance (ESG) performance of the company. It involves the shareholders in engaging on a
wide range of topics including executive compensation, strategy, risk management, corporate
governance and influencing the behaviour of a company.
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Sin stocks: sin stocks refer to stocks of a company either directly involved in or associated with
activities widely considered to be unethical or immoral. A conventional notion of sin stocks
include stocks related to alcohol, tobacco, gambling, sex-related industries, weapons
manufacturers and the military.
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Introduction
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Background
The fossil fuel divestment movement has spurred a new wave of enthusiastic environmental
activism, particularly engaging students in universities across the world. Divestment is often
defined as “the removal of financial support from select companies in order to promote certain
behaviour or policy”1, or “getting rid of stocks, bonds, or investment funds that are unethical or
morally ambiguous”2. In this report we will seek to evaluate the impacts of the divestment
movement and identify some ways in which the divestment movement can best fulfil its goal of
tackling climate change.
The impetus for the new divestment movement originates from the “carbon bubble” argument,
which initially came from an analysis
performed by the Carbon Tracker Initiative
titled “Unburnable Carbon: Are the World’s
Financial Markets Carrying a Carbon
Bubble?”3 and a subsequent article written
by Bill McKibben in 20124. The consensus
among the international community is that
the average global temperature must not
exceed 2ºC above pre-industrial levels in
order to avoid catastrophic climate change.
While the carbon potential of the Earth’s
known fossil fuel reserves is 2795 Gt CO2,
only 565 Gt CO2 can be used if we are to
have a 80% chance of maintaining the rise of
global temperature to within 2ºC. On the
other hand, many of the fossil fuel
companies have market valuations on the
stock market underpinned by hydrocarbon
assets – i.e. how much money they will make
by burning hydrocarbons into energy or
selling off hydrocarbons as raw materials.
Since around 80% of the total fossil fuel
reserves, which constitutes a substantial part
of fossil fuel companies’ assets ($7trn),
Figure 1 The Carbon Bubble Argument
would be “unburnable” (See Figure 1), the
Source: thinkprogress.org
1! Hendey, E. 2015. “Does Divestment Works?”. Available at: http://www.iop.harvard.edu/does-divestment-work Accessed 24/10/2015
2! Hendey, E. 2015. “Does Divestment Works?”. Available at: http://www.iop.harvard.edu/does-divestment-work Accessed 24/10/2015
3! http://www.carbontracker.org/wp-content/uploads/2014/09/Unburnable-Carbon-Full-rev2-1.pdf Accessed 29/10/2015
4! http://www.rollingstone.com/politics/news/global-warmings-terrifying-new-math-20120719 Accessed 28/10/2015
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current stock market valuation is inaccurate and has created a carbon bubble.5
The motivation for the movement, furthermore, came about as “a by-product of the fact that
governments have been slow to act, and frustration is understandable.”6 A lack of consistent and
strong state-level actions on the macro level and a perceived lack of impact on changing
consumption at a micro/individual level motivated students to take constructive actions into their
own hands. The divestment movement, aiming at changing the behaviour of universities,
religious organisations, pension funds and other foundations, thus also presents an interesting
case of activism targeting meso-level institutions. !
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Research Methods and Limitations
As a means of assessing the impact of various aspects of the divestment movement, we reviewed
news articles, news commentaries, statements by relevant organisations, and academic work on
the fossil fuel divestment movement, as well as the wider literature on different kinds of
divestment movements, the evaluation of shareholder prices, the process of investment, the
concept of organisational stigma and the mechanisms of policy change. Our ultimate
recommendations identify effective practices in divestment-related campaigns especially in the
U.K.and the U.S.
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We employed qualitative methods, and primarily semi-structured interviews as our research
approach. The reasons for employing the qualitative methods are first of all the lack of capacity
for rigorous large-scale quantitative research, and secondly the existing gap for a structured
qualitative analysis of various perspectives involved in the debate. We conducted 11 interviews in
total, mostly with activists in the divestment movement, and academics working on climate
change and climate investment. Our interviewees include Andrew Taylor, Campaign Manager at
Fossil Free UK, Professor Gordon Clark, the Director of the Smith School of Enterprise and
Environment (SSEE) at University of Oxford, Alan Rusbridger, the former editor-in-chief of The
Guardian, Professor Dieter Helm at the SSEE, Dr Nick Eyre at the Environmental Change
Institute (ECI) at Oxford, Kate Raworth, a former Senior Researcher at Oxfam and now also at
ECI, Richard Millar, a fellow at Oxford Martin School Net Zero Carbon Investment Initiative,
Michael Urban from the School of Geography and the Environment at Oxford, and four
divestment campaign organisers from Oxford and University College London. This report builds
upon the opinions of our interviewees and hopes to combine these insights from both the activism
side and the academia into specific recommendations for the divestment movement.
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5! Europeans for DivestInvest, 2015. http://divestinvest.org/europe/home/the-case/ Accessed 27/10/2015
6! J Tollefson ‘Reality check for fossil-fuel divestment,’ (Nature vol 521 May 2015), P6
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Section 1 Effects of the Divestment Movement
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As of 28 January 2016, there are 503 institutions worldwide that have committed to at least
partially divesting their assets from fossil fuel companies7. Divestment is often assumed to be
driving down the share prices of the fossil fuel companies and thus pressuring them to change
their carbon-based business models. This economic impact of divestment is reviewed in Section
1.1 below. However, according to many campaign activists, “the goal of the divestment campaign
is not, and has never been, to do financial harm to fossil fuel companies by causing investors to
sell their shares.”8 Rather, it is about changing the public opinion and mobilising support for
policy changes such as scrapping government subsidies for the fossil fuel industry by
stigmatising the industry. This is further evaluated in Section 1.2.
The impact of the divestment movement needs to be evaluated in comparison with alternative
approaches such as shareholder engagement. Universities and foundations that have refused to
divest, such as the Welcome Trust and the Gates Foundation and Harvard University, often
argued that active shareholders within such companies can change their practices through
dialogue and constructive engagement.9 However, it does seem that shareholder engagement has
achieved little with respect to fossil fuel companies.”10 Fossil-fuel companies have continued to
invest more into the discovery of further reserves than in renewable energy,11 whilst nation states
and their taxpayers continue to subsidise these industries.12 Moreover, this business-as-usual
approach looks set to continue: last year Exxon Mobil announced its intentions to double its
current reserves stating government intervention in the form of additional regulation was unlikely13
whilst Shell’s chief executive confirmed the companies continued the Business-As-Usual
approach, in disregard of global emission reduction targets.14
On the other hand, some institutions, such as New York University and Yale University, have
adopted alternative approaches to reduce the carbon impact of their respective campus, possibly
as a result of the pressure from the divestment movement. Williams College and Swarthmore
7! http://gofossilfree.org/commitments/ Accessed 28 /01/2016
8! http://e360.yale.edu/feature/why_the_fossil_fuel_divestment_movement_may_ultimately_win/2898/ Accessed 04/11/2015
Also interview with Andrew Taylor
9! Farrar J. Fossil-fuel divestment is not the way to reduce carbon emissions. Guardian 2015 Mar 25. www.theguardian.com/commentisfree/2015/mar/25/wellcometrust-fossil-fuel-divestment-not-way-reduce-carbon-emissions. Accessed 28/10/2015
10
! T. Tillmann et. al. ‘Fossil fuel companies and climate change: the case for divestment’ (BMJ 2015), P1
11
! Ceres and Sustainalytics. Gaining ground: corporate progress on the Ceres roadmap for sustainability (oil & gas producers). Ceres, 2014. www.ceres.org/roadmapassessment/sector-analyses/oil-gas-producers. Accessed 29/10/2015
! Coady D, Parry I, Sears L, Shang B. How large are global energy subsidies? IMF Working Paper WP/15/105. International Monetary Fund, 2015.
12
13
! Alpern S. Talking to the hand: why engagement with fossil fuel companies offers so little promise. Weblog 2015 Jan 6. http://cleanyield.com/talking-handengagement-fossil-fuel-companies-offers-little-promise/. Accessed 29/10/2015
! Levitt T. Nick Stern: Shell is asking us to bet against the world on climate change. Guardian 2015 May 27. www.theguardian.com/sustainable-business/2015/may/
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27/stern-shell-is-asking-us-to-bet-against-the-world-on-climate-change. Accessed 29/10/2015
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College, two prominent Small Liberal Arts College in the U.S. have also announced that they
would “create an alternative fund that is free of fossil-fuel investments, instead of relinquishing
investments from its existing endowment.”15 The pressure from the divestment movement has
generated positive results even when divestment itself has not succeeded and these considerations
should be taken into account when understanding the impact of the divestment movement.
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1.1 Economic Effects
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Most studies conclude that divestment cannot have a large enough impact on the fossil fuel
sectors to really influence stock prices. The direct impact of fossil fuel divestment on equity or
debt are likely to be limited. The maximum possible capital that might be divested by university
endowments and public pension funds from the fossil fuel companies represents a relatively small
pool of funds. There are 1469 oil and gas firms listed on stock exchanges worldwide, worth a
combined $4.65 trillion. The top 200 public traded fossil fuel companies that the movement
targets holds the vast majority of market capitalisation of the industry. For example, ExxonMobil
alone is worth $428 billion and is the second largest company in the world after Apple.16 Unlike
issues such as tobacco, which had been the target of similar divestment movements before, over
30% of the equity market has a direct connection to fossil fuel extraction17, making divestment
much less effective economically.
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On average, university endowments in the US have 2-3% of their assets committed to investable
fossil fuel public equities. The proportion in the UK is higher with an average of 5% largely
because the FTSE Index has a greater proportion of fossil fuel companies. Similarly, pension
funds have 2-5% of their assets invested in fossil fuel related public equities.18 For example,
according to the 2012 California Public Employees’ Retirement System annual report, 48.4% of
the CalPERS assets under management ($237 billion as of June 2012) were invested in domestic
and international publicly traded equities. Of that, CalPERS invests about 10.7% (i.e. 5.2% of its
total portfolio) in fossil fuel companies. So far, the largest instance of fossil fuel divestment is
Norway’s sovereign wealth fund, which has pledged to sell off over $7 billion worth of coalrelated investments.19 Furthermore, of the $12 trillion assets under management among university
endowments and public pension funds (the likely universe of divestment candidates), the
plausible upper limit of possible equity divestment for oil and gas companies is in the range of
! J Tollefson ‘Reality check for fossil-fuel divestment,’ (Nature vol 521 May 2015), P6
15
16
! “Why Fossil Fuel Divestment Won’t Be Easy.” Evans, Simon. Carbon Brief.Org, 2014. http://www.carbonbrief.org/why-fossil-fuel-divestment-wont-be-easy
Accessed 27/10/2015
! ‘Managing Value at Risk for Portfolios from Climate Change: What are the financial implications of COP21?’ – 27th October 2015 http://divestinvest.org/
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europe/home/events/managing-value-at-risk-for-portfolios-from-climate-change-what-are-the-financial-implications-of-cop21/ Accessed 18/11/2015
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! “Measuring the Global Fossil Fuel Divestment Movement.” Arabella Advisors, 2014. http://www.arabellaadvisors.com/wp-content/uploads/2014/09/Measuring-theGlobal-Divestment-Movement.pdf Accessed 05/11/2015
! Damian Carrington. “Norway confirms $900bn sovereign wealth fund’s major coal divestment.” The Guardian. June 2015. http://www.theguardian.com/
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environment/2015/jun/05/norways-pension-fund-to-divest-8bn-from-coal-a-new-analysis-shows. Accessed 03/11/2015.
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$240-600 billion (2 – 5%) plus about half that amount for debt.20 Even if the maximum possible
capital was divested from fossil fuel companies, their shares prices are unlikely to suffer
precipitous declines.21
Moreover, the liquidity of shares in fossil fuel companies means that the impact of divestment is
likely to be heavily offset by investors with less moral concern, who would take advantage of the
lower share prices. The more illiquid a stock is, the less it tends to be worth. Conversely, the more
liquid a stock is, the less likely it is subject to share price increases or decreases from price
manipulation.22 This study posits that highly liquid stocks, by comparison, are more difficult to
manipulate because of the high levels of trading activity, substantial order book length, and low
information asymmetry.23 This is parallel to the case of liquid sin stocks. A study of sin stocks
found that sin stocks have higher expected returns. This is because certain investors acquire less
sin stocks (i.e. socially conscious investing does make sin stocks less popular), meaning that their
stock prices are depressed relative to their fundamental values. Essentially, sin stocks end up
having cheaper valuations (you pay less for the same amount of earnings) because they aren’t as
crowded, even when the economics are actually in their favour.24 Investors prefer to own
company stocks that are going to perform well but are generally perceived as unpopular, rather
than company stocks that are widely popular because that means there is much less room for the
price to go up. Stock prices are not driven up by people owning the stock—they are driven up by
an increase in the number of people buying the stock.25 Regarding divestment, in order to sell
shares there must be someone willing to buy those shares, and it seems likely that purchasing
investors will care less about climate change than those divesting, even though investors’
preferences probably only matter minimally for the companies in any case.
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Oil and Gas Industry
Stocks in oil and gas companies are usually very liquid. Take Gazprom as an example. Gazprom
is the largest joint-stock company in Russia. The total number of bank accounts holding the
23,673,512,900 shares of Gazprom exceeds 470,000.26 Gazprom’s shares are described as one of
20
! “Stranded assets and the fossil fuel divestment campaign: what does divestment mean for the valuation of fossil fuel assets?” Ansar, Atif; Caldecott, Ben; Tilbury,
James. Stranded Assets Programme, 2013. http://www.fossilfuelsreview.ed.ac.uk/resources/Evidence%20-%20Investment,%20Financial,%20Behavioural/Smith
%20School%20-%20Stranded%20Assets.pdf
! Ansar, Atif, et al. “Stranded assets and the fossil fuel divestment campaign: what does divestment mean for the valuation of fossil fuel assets?” Smith School of
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Enterprise and the Environment, University of Oxford, 2013.
! “Discounts on Restricted Stock: The Impact of Illiquidity on Stock Prices.” Silber, William L. Financial Analysts Journal, 1991. http://www.cfapubs.org/doi/pdf/
22
10.2469/faj.v47.n4.60
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! “Stock Price Manipulation: Prevalence and Determinants.” Comerton-Forde, Carole and Putnins, Talis J. Review of Finance, 2014. http://rof.oxfordjournals.org/
content/18/1/23.abstract
! Teoh, Siew Hong; Welch, Ivo; Wazzan, Paul C. “The Effect of Socially Activist Investment Policies on the Financial Markets: Evidence from the South African
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Boycott.” Journal of Business, 1999, vol. 72 no. 1.
25
! The Economist. `Fight the power’, June 2015. Available at: http://www.economist.com/news/finance-and-economics/21656204-investors-are-being-pressed-selltheir-holdings-coal-oil-and-gas-fight. Accessed 27/10/2015.
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! “Investors / Shares.” Gazprom, 2015. http://www.gazprom.com/investors/stock/ Accessed 11/11/2015
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the most liquid instruments of the Russian stock market—in 2014 the average daily trading
volume of the company’s shares totalled around 17% of the average daily trading volume of
shares, depositary receipts and equity interest at the Moscow Exchange. The company’s stock has
the largest share in the RTS and MICEX indexes.27 As a result of the factors above, divestment
would shift investments within fossil fuel companies to socially less scrupulous organisations,
and only decrease the overall amount of investments by a small proportion of the amount
divested.
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Coal Industry
On the other hand, stocks in coal are much less liquid and thus in a more vulnerable position,
rendering divestment more effective economically in this sector. Coal equities are less than 5%
the total value of oil and gas equities (recall that small market cap makes their prices more easily
manipulable), and have already trended down nearly 50% in the past five years28. Some US firms
have lost more than 90% of their stock value. Overcapacity plagues China’s coal sector, despite
the country consuming as much coal as the rest of the world combined. Coal is also at the sharp
end of any transition to a lower-carbon energy system. Despite its abundance and low cost, it is
high in carbon and other emissions and is relatively inflexible operationally. Institutional
investors are much less exposed to coal than to oil and gas. Even a conservative institution such
as the Bank of America, for example, has three times the exposure to renewables as it has to
coal29. As a result, divesting from coal would be much easier than divesting from oil and gas. The
main concern, however, is that if divestment is focused on coal, other fossil fuel sectors will
absorb most of the coal equity dollars rather than clean energy.
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Furthermore, many of these firms have the majority of their stocks owned by financial
institutions or their respective states, rather than retail investors, such as universities. Coal India,
for example, is one of the biggest companies for coal-specific fossil fuel and is state-controlled.
Likewise, the Russian government has a majority stake in Gazprom, while the majority of the rest
of the stocks is owned by financial institutions.30 JP Morgan, Bank of America, Citi, Wells Fargo,
and Mizuho, for example, have a 40% market share of the global syndicated lending between
them. These are the institutions that are less likely to be influenced by the divestment campaign.31
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27
! “Investors / Shares.” Gazprom, 2015. http://www.gazprom.com/investors/stock/ Accessed 11/11/2015
28
! https://pics.uvic.ca/sites/default/files/uploads/publications/Divestment%20WP%20Jan%202015-FINAL.pdf Accessed 11/11/2015
! ‘Managing Value at Risk for Portfolios from Climate Change: What are the financial implications of COP21?’ – 27th October 2015; http://divestinvest.org/europe/
29
home/events/managing-value-at-risk-for-portfolios-from-climate-change-what-are-the-financial-implications-of-cop21/ Accessed 18/11/2015
30
! “Drop in the Bucket.” DivestBarnard.Org, 2015. http://www.divestbarnard.org/the-non-issues/drop-in-the-bucket/ Accessed 18/11/2015
! “Stranded assets and the fossil fuel divestment campaign: what does divestment mean for the valuation of fossil fuel assets?” Ansar, Atif; Caldecott, Ben; Tilbury,
31
James. Stranded Assets Programme, 2013. http://www.fossilfuelsreview.ed.ac.uk/resources/Evidence%20-%20Investment,%20Financial,%20Behavioural/Smith
%20School%20-%20Stranded%20Assets.pdf Accessed 18/11/2015
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1.2 Stigmatisation
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The divestment movement, it has been suggested, is not driven by a primarily economic agenda,
but by a moral and political one. Campaigns can use divestment as a media hook to generate
stigma around certain industries, such as fossil fuel. If the pressure is high enough, an entire
industry—even a national government—can decide it’s time to change how they do business.32
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Divestment can serve to delegitimise the business models of companies that are using investors’
money to search for yet more coal, oil and gas that can’t safely be burned.33 The kind of stigma
generated by the divestment movement is mostly organisational stigma, a label that evokes a
collective stakeholder group-specific perception that an organisation possesses a fundamental,
deep-seated flaw that de-individuates and discredits the organisation.34 Organisational stigma can
be further divided into event stigma if cause by an episodic event, or core stigma if related to the
nature and the way of operating of the business.35
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It is also claimed that organisational stigma can increase the difficulty for firms to hire good
people, and influence policy decision-making, thus impairing their ability to dominate in the
market.36 Stigma effects can generate a increase in price volatility related to specific firm or
category of firms, thus making investments in those firms less desirable.37 It increases companies’
exposure to litigation, restrictive state interventions and scrutiny, thus reducing stigmatised firms’
ability to engage in impression management activities.38 Stigma to specific firms may cause a
contamination effect to firm’s peers, motivating them to take actions to mitigate this reputation
spillover. Targeted organisations are viewed according to the negative attributes defining the
stigma category they are part of.39 !
! Macaskill, V. 2015. “Does Divestment Work?”. Available at: http://www.newyorker.com/business/currency/does-divestment-work Accessed 24/10/2015
32
33
! Rusbridger, A. 2015. “The Argument for Divesting from Fossil Fuels is Becoming Overwhelming”. Available at: http://www.theguardian.com/environment/2015/
mar/16/argument-divesting-fossil-fuels-overwhelming-climate-change Accessed 25/10/2015
! Vassiliki Grougiou, Emmanouil Dedoulis, and Stergios Leventis. 2015. “Corporate Social Responsibility Reporting and Oragnisational Stigma: The Case of “Sin”
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Industries”. Journal of Business Research
35
! Yuri Mishina and Cynthia E. Devers. “On being bad: Why stigma is not the same as bad reputation”. The Oxford Handbook of Corporate Reputation. 2012
36
! Ben Caldecott, 2013. What does divestment mean for the valuation of fossil fuels assets? Available at: http://www.businessgreen.com/bg/opinion/2299216/whatdoes-divestment-mean-for-the-valuation-of-fossil-fuel-assets Accessed 31/10/2015
! Pratima Bansal and Iain Clelland, 2004. “Talking Trash: Legitimacy, Impression Management, and Unsystematic Risk in the Context of the Natural Environment”.
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The Academy of Management Journal, 47 (1), 93-103
38
! Radolphe Duran and Jean-Philippe Vergne. 2014. “Asset Divestment as a Response to Media Attacks in Stigmatised Industries”. Strategic Management Journal.
39
! Yuri Mishina and Cynthia E. Devers. 2012. On being bad: Why stigma is not the same as bad reputation. The Oxford Handbook of Corporate Reputation.
!11
Advocates have argued that this same tactic has been pursued to stigmatise the tobacco industry
and which is generally seen as a successful campaign.40In an interview in 2013 McKibben
acknowledges the unlikelihood of ever bankrupting ExxonMobil, but that “politically
bankrupting” them is a real possibility, helped by the fact that institutions external to the
campaign start picking up on the message and starting to spread it themselves.41 Regarding the
fossil fuel divestment campaign, there has already been criticism as to the funding of publicinterest activities such as art and theatre, and is accused of providing participating firms with a
false good image.42These criticisms, it is believed, may counteract the fossil fuel companies’
branding efforts.
Figure 2: Potential direct and indirect impacts of a fossil fuel divestment campaign
! Burke, T., 2015, June 23, The production of stigma. https://blogs.swarthmore.edu/burke/blog/2015/06/23/the-production-of-stigma/ Accessed 02/11/2015
40
41
! Ramsay, A., & McKibben, B., 2013, October 30, Bill McKibben interview: time for the climate movement to get on the front foot. OpenDemocracy. https://
www.opendemocracy.net/ourkingdom/adam-ramsay-bill-mckibben/bill-mckibben-interview-time-for-climate-movement-to-get-on-fro. Accessed 03/11/2015
! PlatformLondon, 2013, November 1, Divestment and ending arts sponsorship: both tools of oil company stigmatization. http://platformlondon.org/2013/11/01/
42
divestment-and-ending-arts-sponsorship-both-tools-of-oil-company-stigmatisation/ Accessed 03/11/2015
!12
On the other hand, it also has been suggested by some that the costs inflicted to big corporations,
pension funds or governments by the stigmatisation effect can be rather negligible in most cases.43
Other than “naming and shaming,” activists have little recourse in punishing actors who fail to
participate, while replacement partners can often readily be found.44
!
There is likely to be some elements of truth in both sets of claims. First of all, it is unclear
whether the firms’ recruitment will be impacted beyond a minimal level by the stigma created by
the divestment movement. The graduate recruitment market is highly skewed towards the
employers with a large number of students competing for a limited number of jobs. In a market
where there is less competition between employers than between employees/students, it is
unlikely stigma will play a big role. However, organisational stigma as demonstrated in the
example of the tobacco industry, does provide a channel through which activists can seek to
change public opinion, highlight the problematic practices of fossil fuel companies and increase
the political salience of environmental issues, with the ultimate goal of achieving policy change.
There is no existing research which uses solid quantitative methodologies to look at the impact of
the divestment movement on the salience of climate change issues. However, a YouGov poll
shows points to a small increase between May and December 2015 in the share of people
choosing environment when asked to select up to three of the most important issues facing the
country (9% in May, 11% in September, and 12% in December 2015)45. This small increase does
coincide with the timeline when the divestment movement was hitting the headlines in the news,
even though news stories surrounding COP 21, the 2015 Paris Climate Conference, are probably
a more important explanation.
!!
!!
!!
!!
!!
!!
!!
!!
!!
!!
! Brian R. Early. 2015. “Sanctions and divestment are feel-good policies that often fail”. Available at: http://theconversation.com/sanctions-and-divestment-are-feel43
good-policies-that-often-fail-40355 Accessed 31/10/15
44
! Brian R. Early. 2015. “Sanctions and divestment are feel-good policies that often fail”. Available at: http://theconversation.com/sanctions-and-divestment-are-feelgood-policies-that-often-fail-40355 Accessed 31/10/15
! https://d25d2506sfb94s.cloudfront.net/cumulus_uploads/document/81ewaf2bx0/YG%20Trackers-Issues%202-Most-Important-Issues-070115_W.pdf Accessed
45
26/01/2016
!13
Section 2 Recommendations: Divestment in Itself
!
It would be misguided to claim that the only goal of the divestment movement is to generate
stigma around the fossil fuel industry and to achieve the political goal of pushing for policy
change, since a publicity campaign would be much more direct and possibly more effective. The
divestment movement, even though ineffective in influencing stock prices, should and can have
positive impacts in and out of itself, either through shifting investment into clean energy,
reducing carbon impacts of institutions themselves, or creating local carbon pricing initiatives
that can both inspire and make more possible nation-wide solutions.
!
Even though any consequences resulting from divestment of any one organisation is admittedly
likely to be small compared to the scale of the task in combating climate change, this only means
that large-scale efforts are needed and divestment alone will not be enough. However, with the
positive impacts we envision in this section, divestment can have a wide range of meaningful
impacts but can also help to bring about large-scale responses in the long run.
!
!
2.1 Deepening Divestment: Divest and Re-invest
!
Rationale
Most of the divestment campaigns pressure organisations to divest from fossil fuel companies.
However, neglecting where the divested money will go can lead to tokenistic results.
!
First of all, there is a danger that money divested from coal or tar sands will simply go into oil
and gas. For example, after Stanford divested its “practically non-existent coal investments”,
“there was a lot of back-patting, that is, until it came out that they are deepening investment in oil
and natural gas.”46 This suggests that the impact of the divestment campaign in Stanford was only
a symbolic gesture instead of signifying the beginning of a movement towards reducing the
university’s climate impact. As of 2016, January 28, 60 of the 503 institutions that have divested
have decided to only divest partially from fossil fuel companies (either coal only, or coal and tar
sands)47. This includes 24 of the 58 educational institutions, including University of Oxford and
Stanford University, 6 of the 13 for-profit organisations, including Allianz, an European
insurance company based in Germany, and other influential organisations such as the Church of
England and Norwegian Sovereign Wealth Fund48. As these institutions manage a substantial
amount of financial resources, it is important that the money they have divested can make an
actual difference.
Secondly, Dr. Nick Eyre of the Environmental Change Institute at University of Oxford raised the
concern that investment into the energy sector as a whole will decrease as a result of the
divestment movement. Dr. Nick Eyre points out that the energy sector as a whole gets more
! Borenstein, Severin, What’s a university to do about climate change? The Berkely Blog, August 2014, http://blogs.berkeley.edu/2014/12/08/whats-a46
university-to-do-about-climate-change/ Accessed 04/11/2015
47
! http://gofossilfree.org/commitments/ Accessed 28/01/2016.
48
! http://gofossilfree.org/commitments/ Accessed 28/01/2016.
!14
investment rather than less investment in order to prepare for a low carbon future. It is important
that money divested from either coal and tar sands or oil and gas is re-invested into energy sector,
especially research and operation of clean energy and programmes that improves the energy
efficiency of existing infrastructures. According to the estimate of the International Energy
Agency for example, £632 billion per year of investment is needed to achieve the transition from
fossil fuels and meet growing energy needs and global investment in renewable energy is
currently £190 billion. Thus, it is important that the call for investment in clean energy and
energy efficiency also plays a crucial role in the divestment movement.
Recommendation
We suggest that divestment campaigns incorporate the demand that organisations reinvest money
currently in fossil fuel companies into (1) renewable energy or (2) energy efficiency projects
through Green Revolving Funds, Green Bonds or other energy-related Socially Responsible
Investment (SRI) funds.
An example of this strategy is the Divest-Invest movement49 and the Positive Investment
Cambridge50. More specifically, we’d like to highlight the following component:
Financing Energy Efficiency Projects: Green Revolving Funds (GRFs)
Green Revolving Funds, ensure energy efficiency financing particularly for universities. The
funds pay for retrofitting of buildings so they use less energy. The savings are then reinvested in
further building projects. Green Revolving Funds at Harvard, Stanford, and elsewhere have
generated returns ranging from 20% to 59%, with an average of 28%.51 The Green Revolving
Fund at Harvard, for example, is a $12 million revolving fund that “provides capital for highperformance campus design, operations, maintenance, and occupant behaviour projects”52. The
GRF provides the up-front capital for the projects and applicant departments agree to repay the
fund via savings achieved by project-related reductions in utility consumption, waste removal, or
operating costs. The payback formula thus allows departments to upgrade the efficiency and
functionality of their facilities without incurring any capital costs, while at the same time reduce
the university’s climate impact53. Since its inception, the GRF at Harvard has supported nearly
200 projects that have yielded over $4 million in energy savings annually to give funding to
projects that reduce Harvard’s environmental impact.54
!
!
! http://divestinvest.org Accessed 25/01/2016
49
50
! https://positiveinvestment.wordpress.com/about-2-2/ Accessed 25/01/2016
51
! Indvik, Joe, Robert Foley, and Mark Orlowski. 2013. “Green Revolving Funds: A Guide to Implementation & Management.”
! http://www.green.harvard.edu/programs/green-revolving-fund More information on the tools and resources of starting a Green Revolving Fund can be found at
52
http://greenbillion.org/resources/. Accessed 25/01/2016
53
! ibid.
54
! http://www.green.harvard.edu/programs/green-revolving-fund Accessed 26/01/2016
!15
Benefits and Potential Concerns
!
Achieving energy efficiency is an especially important part in combating climate change. While it
is easier to generate electricity from renewable energies, technologically the provision of heating
still heavily depends on coal and gas55. Energy efficiency projects would be most effective way to
decrease the use of coal and gas for heating.
There might be two concerns relating to this. Firstly, investors might worry about the expected
returns of investment in renewable energy. It is worth noting that many investors targeted by the
divestment campaign will have a `fiduciary duty’, that is `a legal duty to act solely’ in the interest
of maximising returns for their clients or, if they are trustees, of the funds they are trustees of.56 A
white paper by Bloomberg New Energy Finance cites this as an important problem for the clean
energy sector, “Clean energy… is not yet a like-for-like investment compared to other sectors”.57
However, Green Revolving Funds are found to generate a good return for investment. Moreover,
green bonds and renewable energy infrastructure projects can also serve as good investment
options. Green bonds are potentially attractive to pension funds because of their low risk, steady
income streams. Research from the Climate Bonds Initiative and HSBC estimates that the climate
bond market almost doubled in 2012 (from $174bn to $346bn)58. Since 2008, the World Bank has
issued around $3.5bn in AAA rated green bonds59. The solar photovoltaics (PV) fund, developed
by the Pensions Infrastructure Platform (PiP) and Aviva Investors, on the other hand, provides an
example of a project aiming at delivering predictable, long-term, inflation-linked cash flows
through investing in small-scale solar PV installations in the UK. The fund was launched in
February and by June has closed commitments of £131 million from 4 UK pension schemes with
the returns of the fund expected to be at RPI+2-5%60.
Secondly, some may worry that with an equal focus on investment, the simplicity of the
movement’s demands might be compromised and it will be harder to persuade universities or
other organisations to take action. We rather suggest that the element of positive investment adds
a positive means of framing the divestment movement. Not only would the movement apportion
the blame to fossil fuel companies but it would also set out a compelling positive vision of a
green, low carbon future. It would be easier to mobilise support when the negative messages of
the divestment movement is complemented by the positive framing pointing at a better future. It
would also make negotiations with universities and other organisations easier as the movement
already provides these organisations with an ethical and economically attractive alternative that is
! Dr Sarah Darby’s presentation at Oxford Climate Forum, 14 November 2015.
55
56
! “Fiduciary Duty.” Legal Information Institute. Cornell University. https://www.law.cornell.edu/wex/fiduciary_duty. Accessed 04/11/2015
57
! Bullard, Nathaniel. “Fossil fuel divestment: a $5 trillion challenge.” Bloomberg New Energy Finance. August 2014. http://about.bnef.com/content/uploads/
sites/4/2014/08/BNEF_DOC_2014-08-25-Fossil-Fuel-Divestment.pdf. p.16. Accessed 04/11/2015
! http://www.shareaction.org/sites/default/files/uploaded_files/investorresources/Green-Light-Report-web.pdf Accessed 04/11/2015
58
59
! http://www.shareaction.org/sites/default/files/uploaded_files/investorresources/Green-Light-Report-web.pdf Accessed 04/11/2015
60
! http://www.pensionfundsonline.co.uk/content/pension-funds-insider/investment/four-uk-pension-schemes-commit-to-pv-fund/1858 Accessed 05/11/2015
!16
also plausible. The provision of existing plausible alternatives would make it easier for
organisations to move away from the fossil fuel industry.
!
2.2 Beyond Divestment: Local Carbon Pricing Initiatives
!
Rationale
Carbon pricing has been recognised as a critical part of tackling climate change as it internalises
negative externalities i.e. social costs involved in the use of fossil fuels61. It limits the use of
fossil fuels through market mechanisms by reflecting the ‘real prices’ of fossil fuels. Many
economists argue that instituting carbon pricing schemes will have a greater impact on climate
change. Emphasis needs to be placed on dis-incentivising the use of fossil fuels generally. Such
actions would have a far broader remit. By placing a price on emissions based on their
environmental impact “dirty energy would become more expensive than cleaner alternatives…
naturally shift[ing] investment toward cleaner sources.”62
However, while a policy change in the national or international level is hard to achieve, a bottomup process to push for carbon pricing schemes on regional or local levels is possible through the
involvement of mid-level institutions, such as regional authorities or universities. In the U.S.,
Yale University has already adopted an internal carbon charge scheme while Stanford, Harvard
and MIT University of Illinois have either seen academic staffs calling for a carbon pricing
scheme or been considering such a scheme.63
!
Recommendation
We recommend that calls for innovative carbon pricing schemes can be either (i) the next step for
campaigns that are already successful at pressuring for full divestment; or (ii) an alternative
approach for institutions that have been consistently reluctant towards divesting.
Professor William Nordhaus, an economist and the chair of the Carbon Charge Task Force at Yale
suggests that “the appeal of carbon prices is that they apply universally, in a decentralised and
market-based fashion, whereas regulations apply selectively to a limited number of sectors.”64
Specific details of how a carbon tax operates on a university campus can be worked out by each
university or each regional authority. One of the most promising possibility, suggested by
Professor Frank Wolak from Stanford, is a revenue-neutral carbon tax. It works such that the
revenues from the tax are refunded to consumers, so that ‘in the aggregate, households are “held
! The social costs currently stand at approximately $40 to $61 per ton of CO2 according to the estimates by the EPA and the U.S. federal government
61
62
! http://scholar.harvard.edu/files/jorgenson/files/harvardmagazine_09_2014.pdf
http://www.newstatesman.com/blogs/economics/2012/08/mit-academics-propose-carbon-tax-solution-americas-deficit-problems Accessed 24/01/2016
J Tollefson ‘Reality check for fossil-fuel divestment,’ (Nature vol 521 May 2015), P17
63
! http://climatechange.mit.edu/promote-development-carbon-tax Accessed 26/01/2016
Wurth, Julie, Shorter timeline, carbon tax among proposed changes, The News Gazette, 15th May 2015 http://www.news-gazette.com/news/local/
2015-05-15/shorter-timeline-carbon-tax-among-proposed-changes.html Accessed 28/11/2015
! W. Nordhaus et. Al ‘Report to the President and Provost of Yale University: Findings and Recommendations
64
on a Carbon-Charge Program at Yale’ (2015), P3
!17
harmless’”65. Those that reduce their carbon footprint more than other households can receive
greater revenue funds than what they pay for their GHG emissions.
!
Benefits and Potential Concerns
While a carbon tax has been considered difficult politically and would not have much support,
there is recent evidence against this claim. In April 2015, a poll recorded 2/3 in favour of a
carbon tax if it was revenue-neutral.66 A Stanford study also found that half of Republicans would
favour a presidential candidate who supports fighting climate change.67 A disclosure report
released by Carbon Disclosure Project North America in December 2014, indicates that 29
leading American companies (including Bank of America, Delta Air, Dow Chemical, Exxon
Mobil, Google, Microsoft, and Walt Disney) are incorporating a carbon tax scenario in their
business planning and risk management strategies carbon emissions, in anticipation of a carbon
tax. A revenue-neutral carbon tax scheme has also been pursued successfully in British Columbia,
Canada.68
A university carbon pricing scheme can keep up with the divestment campaign in terms of
stigmatisation of fossil fuels, media coverage, raising awareness and taking action to demonstrate
students’ or a university’s demand for action on climate change. Even though a university scheme
may still be largely symbolic because of the small scale of change compared to what needs to be
done, it is a big step for what can be done within the limits of a university campus. It is suggested
that a university carbon pricing would “provide a direct economic signal to units producing
emissions and would help to tip the balance in decision-making in favour of renewable energy.”69
More importantly, initiatives such as a university-level, or a regional level carbon tax can
proliferate to other universities or other regions.70 Furthermore, local level initiatives can serve as
pilot schemes that gradually help the public become accustomed to the idea of carbon pricing,
which will make national level schemes more likely.
!
Case Studies: Yale University and Cornell University
!
! Wolak, Frank, SIEPR Policy Brief, Stanford University, October 2014, http://web.stanford.edu/group/fwolak/cgi-bin/sites/default/files/
65
policy_brief_price_carbon_oct_2014.pdf Accessed 04/11/2015
66
! Komanoff, Charles, Carbon Tax Polling Milestone: 2/3 Support if Revenue-Neutral, Carbon Tax Centre, April 2015 http://www.carbontax.org/
blogarchives/2015/04/15/carbon-tax-polling-milestone-23-support-if-revenue-neutral/ Accessed 04/11/2015
67
! Komanoff, Charles, Carbon Tax Polling Milestone: 2/3 Support if Revenue-Neutral, Carbon Tax Centre, April 2015 http://www.carbontax.org/
blogarchives/2015/04/15/carbon-tax-polling-milestone-23-support-if-revenue-neutral/ Accessed 04/11/2015
! http://www.fin.gov.bc.ca/tbs/tp/climate/carbon_tax.htm Accessed 04/11/2015
68
69
! Oregon Climate http://www.oregonclimate.org/about Accessed 12/11/2015
! Wolak, Frank, SIEPR Policy Brief, Stanford University, October 2014, http://web.stanford.edu/group/fwolak/cgi-bin/sites/default/files/
70
policy_brief_price_carbon_oct_2014.pdf Accessed 05/11/2015
!18
(1) Yale is to become one of the first universities to impose a carbon tax on itself.71 This decision
came out of a committee chaired by William Nordhaus, who says “[Yale’s] carbon tax proposal is
the first such program he knows of and the most comprehensive in coverage.”72
!
Even though Fossil Free Yale have been campaigning for divestment from fossil fuels since 2012
and had their proposals rejected in 201473, Yale Carbon Charge Task Force in April 2015
concluded the university “introduce a comprehensive program for a carbon charge on CO2
emissions from Yale-operated facilities and operations.” On 20 April 2015, Yale President Peter
Salovey and Provost Benjamin Polak announced that the fee is slated to begin in the new
academic year as a three-year pilot program, after which the carbon charge would fully kick in.
Buildings of university departments, offices and residential colleges are divided into units. Each
year each unit will have a base level of emissions adjusted according to its historic emissions
average for the last 3 years. The utility bills the units receive will include a carbon charge or a
carbon rebate corresponding to the increased or reduced level of emission. Yale’s scheme will be
revenue-neutral, exactly the type of model required should governments adopt such a scheme at
the national level.
(2) In June 2014, Cornell University produced a report with specific recommendations include
carbon pricing among lots of other initiatives, such as a travel-offset policy.74 This would provide
funding for campus initiatives and local offset projects.75 A $20-30 per ton carbon charge on
utility bills has been recommended.76 In Cornell University, a charge of about $24/ton CO2
would raise approximately $3m per year, representing about 6% of the campus utility bill.77 Prior
to this, the Cornell Faculty Senate had voted to aim for carbon neutrality by 2035, but the
President has rejected calls for divestment.78 The report was published by the Climate Action
! Hulac, Benjamin, Yale to impose carbon tax on itself, led by the man who helped invent it, April 2015, http://www.eenews.net/stories/1060017204
71
Accessed 12/11/2015
72
! Hulac, Benjamin, Yale to impose carbon tax on itself, led by the man who helped invent it, April 2015, http://www.eenews.net/stories/1060017204
Accessed 12/11/2015
! Fossil Free Yale, https://fossilfreeyale.org/ Accessed 12/11/2015
73
! Climate Action Plan Acceleration Working Group, Cornell Leadership for Climate Neutrality, 27th June 2014 http://csc-production.s3.amazonaws.com/
74
2015/01/27/16/20/53/864/2015_01_24PublicClimateActionAccelerationReport.pdf Accessed 12/11/2015
75
! Climate Action Plan Acceleration Working Group, Cornell Leadership for Climate Neutrality, 27th June 2014 http://csc-production.s3.amazonaws.com/
2015/01/27/16/20/53/864/2015_01_24PublicClimateActionAccelerationReport.pdf Accessed 12/11/2015
! 2015 Illinois Climate Action Plan, 7th May 2015 http://www.news-gazette.com/sites/all/files/pdf/2015/05/14/2015iCAPv5.pdf Accessed 09/11/2015
76
77
! Climate Action Plan Acceleration Working Group, Cornell Leadership for Climate Neutrality, 27th June 2014 http://csc-production.s3.amazonaws.com/
2015/01/27/16/20/53/864/2015_01_24PublicClimateActionAccelerationReport.pdf Accessed 12/11/2015
! Ellner, Stephen, Op Ed-Cornell Can Lead on Carbon Neutrality, Sustainable Campus, 29th January 2014 http://www.sustainablecampus.cornell.edu/blogs/news/
78
posts/op-ed-cornell-can-lead-on-carbon-neutrality Accessed 12/11/2015
!19
Plan Acceleration Working Group set by the University’s President Skorton in response to a
Faculty Senate resolution calling for accelerated action in 2014.79
KyotoNOW!, a student environmental campaign group, originally set up in 2001 in response to
the US rejection of the Kyoto Protocol, considers its campaigning an important contributing to
factor to the university’s sustainability policies including committing to the Kyoto protocol,
agreeing to the President’s Climate Commitment and aiming for carbon neutrality.80 It is a
general environmental campaign group, with divestment as its primary project at the moment.
Even though they have not had success with respect of divestment, KyotoNOW!’s efforts have
led to the University’s President Skorton to creating an advisory committee on the campus aiming
for climate neutrality.81
!
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! Climate Action Plan Acceleration Working Group, Cornell Leadership for Climate Neutrality, 27th June 2014 http://csc-production.s3.amazonaws.com/
79
2015/01/27/16/20/53/864/2015_01_24PublicClimateActionAccelerationReport.pdf Accessed 12/11/2015
80
! Cornell Kyotonow! https://cukyotonow.wordpress.com/about/what-we-do/ Accessed 12/11/2015
! Lang, Susan, Skorton, saying he will consider making Cornell ‘climate-neutral’ forms committee to report by Feb 23, Cornell Chronicle, 13th
81
Feburary 2007 http://www.news.cornell.edu/stories/2007/02/skorton-forms-committee-consider-climate-neutral-policies Accessed 11/11/2015
!20
Section 3 Recommendations: Divestment and Policy Change
!
3.1 Public Mobilisation
!
Rationale
According to many activists and campaign organisers of the divestment movement, one central
goal of the divestment movement is to stigmatise the fossil fuel industry so as to encourage more
potential policy changes, allowing for a shift to renewable energy. Andrew Taylor, the campaign
manager of Fossil Free UK, for example, suggests that the divestment movement can mobilise
support to push for scrapping government subsidies to the fossil fuel industry. A recent study by
the Overseas Development Institute shows that the U.K. government gave an average of £5.9
billon worth of subsidies per year to fossil fuel firms such as BP and Shell in 2013 and 2014 with
most of it in the form of tax breaks
to help boost declining North Sea
production.82 The G20, in total,
provides an average of $452 billion
a year in subsidies to fossil fuel
production.83 In contrast, renewable
energy companies received £3.5
billon of subsidies in 2014-15 from
the U.K. government, a figure that
will decrease in the coming years
with the government ending
subsidies for new onshore wind
farms and cutting the support for
solar power84.
!
A survey carried out in September 2015 by the Department of Energy and Climate Change as a
part of the DECC Public Attitudes Tracker Project shows that 63% of the public believes that the
U.K. is not investing fast enough in alternative sources of energy85. Support for the use of
renewable energy has been consistently high since the start of the tracker in 2012 at around 75%80%86. In September 2015, 80% of the public supports solar power, 73% supports wave and tidal
power and off-shore wind, and 66% supports on-shore wind, while only 23% supports shale gas
fracking87. Nevertheless, such support does not provide an influential means for encouraging
82
! http://www.independent.co.uk/news/uk/politics/uk-government-pays-6bn-a-year-in-subsidies-to-fossil-fuel-industry-a6730946.html Accessed
27/01/2016
http://www.odi.org/opinion/10098-infographics-g20-fossil-fuel-production-subsidies-oil-gas-coal Accessed 28/01/2016
! http://www.odi.org/opinion/10098-infographics-g20-fossil-fuel-production-subsidies-oil-gas-coal Accessed 28/01/2016
83
! http://www.independent.co.uk/news/uk/politics/uk-government-pays-6bn-a-year-in-subsidies-to-fossil-fuel-industry-a6730946.html Accessed 28/01/2016
84
85
! https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/474170/Wave_15_Summary_of_Key_Findings.pdf Accessed 27/01/2016
86
! Ibid.
! Ibid.
87
!21
policy change due to the low salience of environmental issues in determining the choices of
voters. The most effective method of holding government accountable is by voting out an
unpopular government in elections. However, political party or politicians’ stance on
environmental issues are typically at the low end of voter’s priority in deciding their votes. For
the U.S. 2016 presidential election, a poll by Quinnipiac University finds that 6 percent of the
public considers climate change as the most important issue, behind economy and jobs, health
care, terrorism, foreign policy and immigration.88 Before the UK 2015 General Election, only
27% considers that it is “very important” the issue of environment/transport is covered in the
news, ranking it as the 9th of the 13 issues asked89. Media analysis performed by Media
Standards Trust also shows that in April 13-19 2015, the number of mentions with regards to
environmental issues was merely 1/7 of the mentions of economy and ranked 9th of all issues. As
politicians are primarily judged by their positions and performance on issues such as economy,
terrorism, foreign policy, they do not face much external pressure to follow with the public
opinion on issues such as support for renewable energy. More needs to be done to increase the
salience of environmental issues in order to push for policy change.
!
Recommendation
We recommend that incorporating the following components into the messages of the divestment
movement will help to better mobilise public support:
1. Highlight the differences between public support and government action regarding fossil fuel
industry and renewable energy, and suggest that politicians, so far, have been primarily
accountable to the fossil fuel industry rather than the electorate. Statistical evidence on fossil
fuel companies’ lobbying spending can strengthen this message (estimated at €44 million per
year in the EU90 and $145 million per year in the U.S.91).
2. Include a positive frame into the movement through the added focus on “Re-investment”,
contrasting green growth against “dirty oil” and point out that we can move from dependence
on fossil fuel to a greener future by “divesting” from fossil fuels and “re-investing” into
renewable energy and energy efficiency projects.
!
These messages will continue to be concise but will provide a sharper contrast that can help
motivate actions. The divestment movement and the wider climate change movement has heavily
emphasised the negative consequences of inaction. It is possible that a substantial part of the
public tend to tune out and simply ignore these long-run concerns which requires a very high
level of coordinated collective action if they are to be addressed. It is less likely that the public
will choose to ignore a more positive frame of hope and a better future. The added component of
“Re-investing” and the corresponding positive frame can also address some of the claims that the
divestment movement is tokenistic or does not make a meaningful difference. The contrast
between these two frames sets out a vision for the future, while exposure of the solution, i.e.
Divest and Re-invest, points out a clear pathway to achieve a better and greener future. This
88
! http://www.pollingreport.com/prioriti.htm Accessed 27/01/2016
89
! http://www.bbc.co.uk/news/uk-politics-30980022 Accessed 27/01/2016
90
! Oxfam. (2014). Food, fossil fuel and filfthy finance. http://policy-practice.oxfam.org.uk/publications/food-fossil-fuels-and-filthy-finance-332741 Accessed
25/11/2015
! OpenSecrets.org. Influence & Lobbying: Oil & Gas. http://www.opensecrets.org/lobby/indusclient.php?id=E01 Accessed 26/11/2015
91
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combined message, in our opinion, will prompt more people to take action and make climate
change a more salient issue.
!!
3.2 Engaging the Academia and Conventional Institutions
!
Rationale
While the there is an economic argument for divestment based on ideas relating to the ‘carbon
bubble’, it is necessary to correct these ‘market failures’ by addressing the ways risks from
unburnable reserves are evaluated. Investments can expand installed capacity and trigger
innovation, thus improving efficiency. The value of investments is determined by the expected
beneficial returns, time, risk factors and others.92 However, current investment prices are
inefficient due to a lack of information on what these firms are really worth given that 4/5 of the
proven fossil fuel reserves need to be kept in the ground, i.e. that these companies are being
priced on unburnable reserves. A report by Carbon Tracker notes that ‘analysis by McKinsey and
the Carbon Trust demonstrates that greater than 50% of the value of an oil and gas company
resides in the value of cash flows to be generated in year 11 onwards.’93 HSBC analysis of 6
major oil and gas companies estimated that the value ‘at risk from unburnable reserves would be
equivalent to as much as 40-60% of the market capitalization.’94 Recently, Prince Charles and the
Bank of England have also issued warnings to the financial sector regarding stranded assets.95
When such risks are taken into account by financial institutions, the amount of investment for
fossil fuel companies is likely to decrease substantially together with their shares prices.
!
The reason that financial companies haven’t taken into account the risks yet might be that they
believe they can quickly sell these shares before such a joint belief shift occurs in the market in
the future. The idea of a joint belief shift is that despite changes in external circumstances
financial institutions will often change the way they conduct business when there is a joint shift
from one cognitive map of how things are done to a new one.96 However, probably only a small
number of financial companies will be able to escape the ‘Climate Minsky Moment’ in this way,
since the behaviour of financial companies would itself set off the joint belief shift that will be
the beginning of the transition. More research is needed to investigate the considerations of
financial institutions, and whether they can be persuaded to incorporate the ‘carbon bubble’
consideration in evaluating the value of stocks in fossil fuel companies.
!
92
! Piana, V. 2010. 'Product Differentiation'. Available at: http://www.economicswebinstitute.org/glossary/product.htm Accessed 24/10/15
93
! Camanale, Mark and Jeremy Leggett. 'Unburnable Carbon – Are the world’s financial markets carrying a carbon bubble?' Carbon Tracker. 2011. p.19. http://
www.carbontracker.org/wp-content/uploads/2014/09/Unburnable-Carbon-Full-rev2-1.pdf. Accessed 04/11/2015.
! http://www.businessgreen.com/digital_assets/8779/hsbc_Stranded_assets_what_next.pdf Accessed 05/11/2015
94
95
! Trotman, A., 2013, April 18, Carbon bubble could fuel another global economic crisis, report warns. The Telegraph. http://www.telegraph.co.uk/finance/
newsbysector/energy/10004987/Carbon-bubble-could-fuel-another-global-economic-crisis-report-warns.html Accessed 03/11/2015
Carrington, D., 2015, October 27, Prince Charles warns financial sector and charities of fossil fuel risk. The Guardian. http://www.theguardian.com/environment/2015/
oct/27/prince-charles-warns-financial-sector-charities-fossil-fuel-risk Accessed 03/11/2015
! Pepper D. Culpepper 2005. “Institutional Change in Contemporary Capitalism: Coordinated Financial Systems since 1990”, World Politics, Vol. 57, No. 2 (Jan.,
96
2005), pp. 173-199
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In this regard, conventional institutions can play an important role. Firstly, conventional
institutions who have accepted or are likely to accept the concept of ‘stranded assets’ and ‘carbon
bubble’, such as central banks, can be influential in setting off the joint belief shift as their action
has a powerful signalling function for financial institutions. On the policy side, regulations
around the disclosure of carbon risks and carbon accounting can play a role in exposing the
‘carbon bubble’ and managing a transition from risky fossil fuel assets. So far, academics have
already engaged in this process of influencing conventional institutions. The Stranded Assets
Programme at the Smith School of Enterprise and the Environment at the University of Oxford,
for example, has had support from the the Bank of England and the International Monetary Fund
(IMF), two very conventional institutions.97 Studies produced by the Stranded Assets Programme
have been cited in the statements of the World Bank and IMF that champion climate actions.98
However, there seems to be a disconnect between the divestment movement, which is not
necessarily seen as ‘the most reasonable’ movement, and the stranded assets programme along
with other academics in the sciences99. Academics in the humanities and social sciences are often
seen as more engaged in the movement rather than academics in the sciences100. Of the 106
Oxford academics that have signed the open letter for the Oxford Divestment Campaign, for
example, 49% are from the humanities and social sciences, while only 45% are from the
Mathematical, Physical and Life Science Division.101
!
Recommendation
We recommend that (1) the divestment movement at universities engages more actively with the
academic staff at their institutions, especially those engaged in relevant research, and when
circumstances permit, encourage academic staff to take part in negotiation with the universities;
and (2) work with research programmes on stranded assets in influencing conventional
institutions to get their support and push for relevant regulations.
!
The active support from academics engaging in the sciences and special those who have done
research in this area can be potentially very influential in university policies as their academic
work can help to demonstrate the inconsistency between the findings of university research and
the university’s policies on climate change102. Regulations and support from conventional
institutions, on the ether hand, can help create change on a large scale, as discussed earlier in this
section.
!
!
! Interview with Professor Gordon Clark, the Director of SSEE at Oxford
97
98
! http://treealerts.org/type/2013/10/world-bank-and-imf-heads-champion-the-economic-benefits-of-climate-action/ Accessed 28/01/2016
99
! Interview with an academic at Oxford (Respondent 10)
!
100
Interview with an academic at Oxford (Respondent 10)
101
!
https://oxfordacademicsfordivestment.wordpress.com/signatories/ Accessed 28/01/2016
102
!
Interview with an academic at Oxford (Respondent 07)
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!
!
Conclusion
!!
!
The divestment movement is a new wave of environmental activism that has gained a substantial
amount of traction, especially among the student populations at universities. This report seeks to
identify the principal effects of this new wave of activism and understand its potential in
connecting with the wider climate change movement to combat climate change.
!
Through secondary research and interviews conducted for this project, it emerges that the
divestment movement currently has a primary impact by stigmatising fossil fuel companies,
which may translate into progress in policy change. However, it is often agreed that the effect of
influencing share prices is minimal outside the coal industry.
!
Divestment, though, can have meaningful consequences in and out of itself. This report suggests
that divestment campaigns incorporate an element of “Re-invest” in their demands so that the
divested money can be re-invested into renewable energy or energy efficiency projects and thus
make a clear difference. This report advocates local initiatives to push for carbon pricing schemes
to reduce the climate impact of universities or other organisations and to trial as precursors of
potential nation-wide policies.
!
In terms of pushing for policy change, this report proposes a sharper message for the movement
that focusses on a series of contrasts, between public opinion and government action, between the
positive narrative of “Re-invest” to a greener future and the negative narrative directed at fossil
fuel companies. This report further advocates engagement between the movement and academics,
especially those working on climate change issues and stranded asset programmes to collaborate
and use both pressure and expert advice as a means of influencing conventional institutions,
which can be pivotal in the transition away from fossil fuels.
!
More research is needed with regards to financial institutions. Understanding their motivations
may be instrumental in devising strategies to influence them in reevaluating the stock market
value of fossil fuel companies. Further research also needs to be undertaken on investigating the
relationship between the divestment movement and public opinion on climate change issues,
especially concerning the perception of the divestment movement and the effect it has on the
importance of climate change issues in determining voter choices.
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