Global Divestment Day shows need for responsible investment

Reading time: 4 minutes
16 February 2015

LONDON: This weekend thousands came together for the first ever Global Divestment Day to demand institutions and individuals divest from fossil fuels. While some studies show it may not be the most effective method to lower emissions, divestment is key to the low carbon economy's wider transition.

Through 450 events in 60 countries, campaigners called for organizations that serve the public good such as governments, educational and religious institutions, to freeze any new investment in fossil fuel companies – and divest from direct ownership that includes fossil fuel public equities and corporate bonds within five years. As a result, 181 cities and universities committed to divest.

Damian Ryan, Senior Policy Manager, The Climate Group, explains divestment and renewables investment both represent two sides of the same coin – the need for responsible investment: “Divestment from fossil fuels is an essential part of the transition to a clean global economy. Very simply, we need to shift capital from high carbon infrastructure and investments to low and zero carbon ones. The sooner we move the better, not just for the climate but for the economy too. But the transition also needs to be done in a managed way to avoid stranding assets and destroying company value unnecessarily.

“Fossil fuel companies have a key role to play in this planned transition by explaining to investors how their business will prosper in a carbon-constrained world. As the shift towards fossil fuel divestment gathers pace the risk increases that businesses which fail to plan for the clean economy, plan to fail.”

Acting on climate

To date, a growing number of institutions are committing to slowly divest from fossil fuels. Recently Norway’s Government Pension Fund Global, worth £556 billion (US$856 billion) and founded on the nation’s oil and gas wealth, made headlines when its first report on responsible investing revealed the Fund is divesting from coal-mining groups on environmental and climate grounds.

The fossil fuel divestment campaign started in the US, driven by pressure from students on their universities to drop shares in coal companies. Many colleges accepted the challenge, including the board of trustees at California’s Stanford University.

Now the movement has officially gone global. Run by an international network of campaigns and campaigners and convened by the Go Fossil Free campaign by, Global Divestment Day sends the powerful message to the world that climate change is happening, and not tacking action would further delay the transition to a low carbon future.

To divest or invest?

But divestment may not be the most effective method to lower emissions and tackle climate change, as proven by a new paper by The American Security Project on ‘Effective Measures for tackling climate change: an analysis of the divestment movement’.

Authors explain that investment in next generation energy solutions should also come from governments, and other tools such as putting a price on carbon are needed to drive the low carbon economy. This way campaigns would be tailored around the demand for government support for renewables, generating a more effective and long-term shift from subsidies to oil and gas companies, to the emerging carbon-free energy sector.

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by Virginia Bagnoli

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