The update follows this archived article below!

This piece highlights the merits of the fossil fuel divestment approach. My next piece covers an alternative view, evaluating the advantages of engagement with fossil fuel companies.

A decade ago, noted environmentalist Bill McKibben had a radical-sounding idea. To save the planet, we needed to “revoke the social license of the fossil fuel industry.” His comprehensive vision of fossil fuel divestment would require financial institutions and civil society to stand shoulder-to-shoulder. This plan was audacious; in 2011 Exxon Mobil was the largest company in the world, and nearly every foundation and academic endowment invested in fossil fuels.

However, divestment has gained remarkable traction in recent years, going from a fringe strategy to a $14.5 trillion movement with over a thousand major investors, pension plans, and endowments committed. Today, as institutional and retail investors pour money into environmentally conscious funds, it is time to consider the financial and social benefits of the movement.

The divestment movement changed the conversation around fossil fuel finance. Investors and banks are increasingly questioning the long-term viability of the entire sector. Divestment seeks to stigmatize fossil fuels and raise uncertainty around their continued use, to reduce the financial desirability of fossil assets. Fossil fuel mining, exploration, and extraction all are capital intensive activities that demand constant access to capital. If capital costs rise or the supply of capital is reduced, projects can become uneconomical and fossil fuel companies can see their valuations fall. This process is well underway in financial markets for the most polluting and least efficient fossil fuel, coal. Even for oil and gas, a study across thirty-three nations indicates that increased divestment pledges are associated with decreased debt and equity capital flows to fossil fuel firms. Unsurprisingly, the effectiveness of divestment is amplified in countries with strong environmental policies and diminished in those that subsidize fossil fuels.

Continued at source…

March 28th, 2024 Article Update:

Update on Fossil Fuel Divestment

Based on the search results, there appears to be significant progress in the fossil fuel divestment movement since the 2021 article you referenced:

– Over 1,600 institutions holding more than $40.6 trillion in assets have now divested from fossil fuels, according to the Global Fossil Fuel Divestment Commitments Database[1]. This represents a massive increase from just a decade ago when the divestment movement was still in its early stages.

– Many prominent universities and colleges, including New York University, the University of California system, and over 100 other U.S. schools, have fully or partially committed to divesting from fossil fuels[2]. This trend is expected to continue, with California potentially passing legislation to divest its two largest pension funds from fossil fuels in 2024[1].

– The divestment movement has gained significant momentum in recent years, with the number of divesting institutions jumping by 120 and $1.4 trillion in assets in less than two years[1]. This reflects growing concerns about the financial and environmental risks of fossil fuel investments.

– Studies have shown that pension funds that divested from fossil fuels 10 years ago would be $21 billion richer today, indicating that divestment can be a financially prudent strategy as well[1].

– However, some challenges remain, as fossil fuel companies are still able to raise financing and the energy sector remains the smallest in the S&P 500[6]. The movement is also working to coordinate divestment from both fossil fuels and weapons[1].

In summary, the fossil fuel divestment movement has made significant strides in the past few years, with over $40 trillion in assets now divested globally[1]. This trend is expected to continue as more institutions recognize the financial and environmental benefits of moving away from fossil fuels.

Research Sources: