Divesting Savings to Mitigate Global Warming

2016 was a decisive year for the global commitment against climate change. Three events in November highlighted a critical moment in the global action against global warming. Firstly, the Paris Agreement came into force on 4 November. Secondly, the Agreement was ratified at the Marrakesh Conference between the 7th and 18th. Finally, Donald Trump won the election on November 9, after proclaiming in his campaign that the United States may withdraw as a subscriber of the Paris Agreement. Given the new political uncertainties in the climate agenda, a new strategy has been consolidated to put pressure on the markets to reduce carbon dioxide emissions. The divestment movement has resulted in 688 institutions and 58,399 individuals across 76 countries. Some governments, have even committed to “divest” their savings from fossil fuels to meet global warming mitigation targets. This means £4.1 trillion has been moved from funding fossil fuels to funding sustainable sectors such as renewable energy or social housing.

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Jordi Albacete and Aitor Mingo Bilbao 

Global warming is already a reality. 2016 has been recorded as the hottest year in history (at least, as far back as weather records are available).

Exploitation of fossil fuels is the leading cause for the acceleration of climate change, and has been since the 1950s. These fossil fuels, specifically petrol, have become the main source of carbon dioxide emissions. This gas is mainly responsible for the greenhouse effect (1) and consequently, global warming.

Petrochemical plant in Grangemount (Scotland). By Ric Lander.

Simultaneously, exploitation of fossil fuels has become the primary driver of the global economy. 85% of the global energy supply comes from fossil fuels (oil, coal and natural gas), and energy is crucial for economic development.

Currently, economic growth in most countries is linked to the affordability of these fossil fuels. The international relations and many of the political conflicts, particularly in the Middle East, are influenced by the access to and trading of petrol.

However, despite the fact that national and international politics is impregnated with oil, the ordinary citizen does not know how this industry is financed.

But recently there has been a promising change. There are signs that this economic paradigm is slowly shifting in a different direction. Influential countries like Germany are investing in alternative energy systems and emergent countries like Brazil — highly dependent on and successful within the petrol industry — are now collapsing.

Nicholas Stern, Chief Economist of the World Bank between 2000 and 2003, points out that economic growth and climate change mitigation are bound to meet.

Financial Speculation and Fossil Fuels

The shares in fossil fuel industries are quoted in the stock market according to the number of available reservoirs, whether or not these are exploited.

This overvaluation of the extractive capacity of fossil fuel companies generates more appetite in the investors, who see these companies as having great profitability in the long term.

Ecological campaigns have labeled this speculative maneuver “the carbon bubble.”

Stock Indexes. Picture free of usage. Available at Pixabay.

The logic of financial markets, and its encouragement of fossil fuel investment, goes against the warnings of scientists.

The fact that untapped reserves are valued as an asset implies that untapped fuels have to be traded at some point. This, in turn, helps maintain the value of the fuels extracted.

If these companies were valued solely for the fuels in real exploitation, their prices would fall, and thus they would lose investors who would move their capital to other industries with better possibilities of development like renewable energy production technologies.

This capital shift would significantly affect the prestige of companies with more untapped reserves, which could see their ability to attract investment hurt, according to a study by Oxford University in 2013.

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Divestment, Origins and Impact

Divestment is not a new phenomenon. In the past, the most significant case was the divestment and boycott of South African products during the Apartheid period to abolish the segregationist system.

In the United States, the divestment movement from fossil fuels started in 2005 and it has been the fastest growing divestment movement in the world. A milestone for the history of divestment in this country was the withdrawal of 50 billion dollars  from fossil fuel industries from Rockefeller oil fortune heirs in 2014, before the the climate change summit of the UN which was held in the same year.

Currently more than 100 fossil fuel companies are the object of divestment campaigns in the United States.

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Faced with this scenario, scientists are demanding that the industry limit exploitation below 20% of current reserves and keep the rest of the fossil fuels underground to avoid catastrophic effects derived from global warming.

However, warnings from the scientific community clash with economic reality. The current dependence of our society and the economy on the fossil fuel industry, both globally and locally, is disproportionate from what is required to begin the transition to a new energy model. The withdrawal of investment in fossil fuel companies based on their untapped reserves would cost € 2 trillion, according to a Carbon Tracker study.

Logo of Carbon Ranking by Environmental Investment Organisation.

Some economists point out that any radical measures taken at this time to move to a new energy model would produce a new financial debacle more intense than that of 2008, when the real estate bubble exploded in the United States.

In recent years, a number of initiatives have emerged to recalculate the stock market value of fossil fuel companies. For example, the Environmental Investment Organization (EIO) created a stock index (2) known as the Carbon Ranking to assess the environmental impact and carbon footprint of companies (total emissions of carbon dioxide  caused by fossil fuel consumption).

 

 

Divestment and Protection of the Planet

The experts of the Intergovernmental Panel on Climate Change and researchers on climate change all over the world urge governments to decarbonise their economies.

Decarbonisation implies ending the activity of fossil fuel exploitation to satisfy the energy demand, which would reduce carbon dioxide emissions. To meet the resulting deficit in energy, an increase of investment in the renewable energy sector will be indispensable.

Contrary to warnings from climate change experts, Donald Trump, in his election campaign, promised just the opposite: increase investment in the fossil fuel industry and withdraw subsidies from renewable energy.

One of the tactics that environmental activism has taken is to stop the activity of fossil fuel companies via divestment from fossil fuels.

This practice consists of revealing the chain of investment from one extractive company through their shareholders and asking them to drop their shares in these companies. Generally, alternative options are presented to them, for example, social housing or renewable energy, in which they can obtain a similar or equal profit.

One of the most common strategies used by divestment campaigns is to identify the investments in fuel industries held by pension funds.

Samuel Arregocés (left) and Danilo Urrea (right) from Colombia raising awareness of the investments of the pension funds from the Scottish Parliament in La Guajira (Colombia). Photograph by Ric Lander.

In Scotland, the environmental organisation, Friends of the Earth Scotland has demanded that the Scottish Parliament change their pension funds scheme, which has investments in BHP Billiton, the company responsible for the exploitation of the largest open-cast (3) charcoal mine in the Colombian Guajira. Colombian activist groups have identified how the activity of this company in Cerrejon has displaced local communities, violated their rights and degraded the ecosystems of the area. We reported on  this case in a previous article.

In 2015, and after 20 years, 192 states and the European Union committed to stopping the forecasted and imminent climatic cataclysm by signing a non-binding (4) legal document, the Paris Agreement.

The original aim of this agreement was to keep global warming below 2 degrees Celsius until 2100. This limit would reduce the risk of severe environmental catastrophes. After the countries met, they agreed on an even stricter limit of 1.5 degrees.

A large part of the scientific community demands a more ambitious challenge: not only to reduce the effect of greenhouse gas emissions, but to absorb these emissions with large scale technology. This is what is known as geoengineering or climate engineering. For instance, by installing big carbon hoovers to capture emissions and store them hermetically in  place, we would avoid its concentration in the atmosphere.

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The Paris Agreement (COOP 21) and the Marrakesh Conference (COOP 22)

World leaders reached a global consensus for the first time in 2015, to mitigate climate change, after hearing the forecasts by scientists from the Intergovernmental Panel for Climate Change (IPCC). According to their data, if the levels of greenhouse gas emissions remain what they are today, and we do not mitigate them, the global temperature could increase by between 3.7 and 4.8 degrees by 2100, in comparison to pre industrial levels.  

COP22 climate march 13th Nov 2016 taken by Richard Dixon Director of Friends
of the Earth Scotland

 

In addition to provoking a rise in the sea level, scientists say that this increase would worsen the effects of extreme weather events, such as floods, droughts and cyclones. The planned limit, fixed by experts, for the Paris Agreement was to keep the rise to a maximum of 2 degrees Celsius.

Picture by Edgard Winkler Free Usage. Available at Pixabay.

After the Agreement was finalised, the target became more ambitious: aiming now to limit the increase by 1.5 degrees Celsius, above preindustrial levels. This limit would reduce the risk of  severe environmental catastrophes.

One of the big successes of the Paris Agreement was that two of the world’s heaviest carbon dioxide emitters (the United States and China) subscribed the agreement. Overall, these two super economies are responsible for more than 40% of global carbon emissions.

The Agreement is voluntary and provides governments with a legal framework (5) to implement mitigation policies, adaptation and finances by 2020. Experts, as well as  the civic society who participated in the policymaking and environmental groups, have worked more than 20 years to reach this agreement.

The global consensus for climate change mitigation could be at risk. The newly elected president of the United States, Donald Trump, claimed in his electoral campaign that he would withdraw the United States from the Paris Agreement. If he were to follow through with his pledge, he would find massive global opposition. Michael Brune, director of the Sierra Club, the US’s largest environmental group, was adamant that “It would be very difficult for Trump to remove the US from the Paris Agreement. If he tries to […] he will run headlong into an organised mass of people who will fight him in the courts, in the marketplace, and in the streets.”

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Environmental Activism and Divestment

Many environmental groups worldwide have coordinated a global campaign to support local divestment initiatives to raise awareness within local communities about the effects of fossil fuel investment from pension funds and universities.

The 350.org movement coordinates divestment initiatives worldwide. Its name is a reference to that fact that the atmosphere can only tolerate a concentration of carbon dioxide of 350 parts per million. Below this level, it can effectively filter all the sun’s radiation as well as the gas emissions from the earth into the atmosphere.

Protest from activists of the group BP or not BP demanding the Theatre Festival in Edinburgh to divest from the oil company. Photograph by Ric Lander.

The presence of carbon dioxide in the atmosphere has already surpassed this optimum point. At this moment, levels have already reached 400 parts per million. Moreover, this proportion is increasing by 2 parts per million a year. To surpass this increase would provoke a climate turning point with consequences that are completely unpredictable and extremely hazardous for the planet, says Dr. Jansen Hansen, former director of Space Studies at the Goddard Institute and one of the world’s most respected climatologists.  

In 2012, 350.org launched the campaign Go Fossil Free!. They urged universities and high schools, as well as cities, religious institutions and pension funds, to withdraw their investments from the oil, charcoal and gas companies.

The movement has grown gradually beyond the divestment from institutions thanks to the work of big and influential organisations from new sectors which are selling their assets in fossil fuels. Currently, the big pension funds and private companies represent more than 95% of the assets that are being divested.

The campaign Divest-Invest unites the most important divestment initiatives and organisations — among them 350.org — aiming to transfer funding from fossil fuel industries to the renewable energy sector. In addition, other organisations such as Friends of the Earth Scotland, People and Planet, Fossil Free, and Move Your Money use the divestment strategy with the same goal. These groups organise divestment campaigns to lobby universities and institutions.

In 2016, the divestment movement doubled and more than 600 institutions and more than 50,000 people have divested 3.4 trillion dollars in companies dedicated to the business of fossil fuels since the start of this campaign.

Divestment in Scotland

The environment and decarbonization agenda in Scotland, developed during successive governments in Scotland, is one of the most ambitious in the world and shows its interest in sustainable development. In 2015, the Executive Secretary of the UN Framework Convention on Climate Change (UNFCCC), Christiana Figueres, called Scotland’s “advances” in the face of climate change “exemplary”. Scotland is second only to Sweden in reducing carbon dioxide emissions.

Occupation of Edinburgh University in 2015 by activists demanding divestment from fossil fuels to the educational institution. Photograph by Ric Lander.

Some of the major Scottish institutions, especially universities, have been pioneers in the divestment of fossil fuels. The University of Glasgow was the first university in Europe to disinvest in the oil industry. This historic University withdrew the equivalent of 23 million euros in fossil fuels from big companies like BP, Chevron and Shell. The University of Edinburgh has been one of three universities, along with Cambridge and Oxford, with more capital invested in the fossil fuel industry. In 2015, it withdrew its investments from three large companies after an intense campaign orchestrated by its students and the environmental group People and Planet.

Friends of the Earth Scotland is leading a campaign for the withdrawal of pension fund investment from the Scottish parliament in the shares of one of Britain’s biggest fossil fuel companies, BHP Billinton. A total of £1.7 billion from Scottish pensions are invested in mining and exploitation activities, emitting more carbon to the land and polluting places like the Arctic and the tropical forest of Borneo. These activities are destroying the livelihood (6) of the inhabitants in the areas where these companies operate, according to the organization.

In October 2015, Friends of the Earth Scotland invited two Colombian activists to “report the evictions, the uprooting and cultural extermination that is taking place in the Colombian Guajira”, explained Danilo Urrea, a member of Friends of the Earth Colombia CENSCAT Agua Viva. In an interview with Cosmopolita Scotland during his visit, he added: “We came to share experiences with European organizations and to ask for solidarity with the Guajiro people. Specifically, to ask pension funds and investors more responsibility in Cerrejón (a Colombian holding where different companies like BHP Billinton, AngloAmerican and Glencore participate with shares).

Colombian campaigners with members of Friends of the Earth Scotland demanding divestment from pension funds investing in the Cerrejon coal mine in La Guajira, Colombia, in Edinburgh, in 2014. Photograph by Ric Lander.

In 2013, the British newspaper The Guardian ranked BHP Billinton as one of the 90 companies responsible for 63% of the greenhouse effect from the start of the industrial era until 2010.

The mining model in the Colombian Guajira that the company has established “affects the rights of the population while it has the financial support of the Colombian government and the investors where the pension funds have their shares” says Samuel Arregoces, one of the displaced peasants In an interview with Cosmopolita Scotland in 2015.

Scotland is the ancestral land of Donald Trump (his mother was born in a Scottish village) and, as in Ireland, the American tycoon and president elect owns businesses including golf courses. In April 2012, Trump urged the Scottish Parliament to cancel a proposed offshore wind farm, as wind turbines would ruin their sight of their Golf Resort in Aberdeen.

“They are ugly, noisy … if Scotland does this, Scotland will have serious problems, it will lose tourism that will go places like Ireland, and they will laugh at us,” he said.

When asked for evidence for his claims about the negative impact of turbines on tourism, Trump said, “I am the evidence, I am a world-class tourism expert.” Finally, in December 2015, the Scottish Supreme Court ruled against him, which meant his third legal defeat in the case.

Divestment in Spain

In Spain, the divestment movement has less force than in northern Europe or the United States. There is a difference between the economic reality in these countries, which could explain their different perceptions of investment. For example, in 2016 the purchasing power per capita (aka. disposable income) [this means the income without taxes and social security contributions, including received transfer payments per person] in Spain was 13,840 whereas in the UK was 21,141. Disposable income is the income without taxes and social security contributions, including received transfer payments per person.

In Barcelona, there is the platform 350.orgBCN which is linked to the global movement 350.org.

On the Global Day of Divestment 2015, this platform organised an action against the Catalan savings bank, La Caixa, one of the most popular savings banks in Spain. The action consisted of a flash mob in the social and cultural center of the Obra Social La Caixa, in Barcelona.

The organization chose this entity because it was the largest shareholder of the oil company Repsol, the Spanish oil company with the most exploitations in Latin America. At that time, La Caixa held a 11.7% interest in Repsol. In addition, this bank is one of the main shareholders of Gas Natural Fenosa with a significant share of 35%, according to data from the environmental group. They called for the withdrawal of investment in this gas company.

In May 2016, 350.orgBCN organized a demonstration in Barcelona on the occasion of the global action #BreakFree [from fossil fuels].

Picture by Domingo Escudero

The platform also made a documentary, Corazones Verdes Facing Climate Change, with the participation of experts in economy, energy and food sovereignty. The documentary aims to raise awareness about the importance of responsible consumption as well as the importance of activism in social movements.

Divestment in Latin America

Some Latin American countries like Brazil and Colombia are major exporters of fossil fuels to the international market.

Brazil’s economy is dependent on the export of natural resources and fossil fuels. The country has a long history of opposition from environmental groups against the interventions of large extractive companies and their effect on the natural environment.

Picture by Friends of the Earth Scotland available at Flickr (all rights reserved).

The Petrobras oil company has a large participation in the financing of the Brazilian public sector. 51% of its shares are in the hands of the Brazilian state, the largest shareholder, as energy sources are one of the country’s major public interests; the remaining percentage belongs to private entities. The company is ranked as the fourth largest global  mixed-capital (public and private) international oil company. Petrobras is also the largest company in Latin America.

Colombia, like Brazil, is a great exporter of natural resources. In terms of fossil fuels, the country has the world’s largest open-cast coal mine, El Cerrejón. This mine obtains investment from the pension funds of the Scottish parliament.

Other Latin American countries like Venezuela and Ecuador present situations similar to those of Brazil and Colombia: a high dependence on their exports and a large participation of the fossil fuel industries in the public sector. On the other side of the spectrum is Chile, the country in South America with most energy dependence.

The political will of governments is necessary to appease (7) investors’ short-sighted appetite and redirect the energy transition. For that, the levels of consumption must fall and the countries must ensure their competitiveness and growth among them. That is why international treaties such as the Paris Agreement are fundamental, says UN Secretary General Ban Ki Moon.

The insatiability of investments and consumption may have to be tempered to provide a real adaptation, which is likely to be complex, to ensure the energy transition. There is still a long way to go to bring the planet closer to a transition that is required with urgency. Regulating demand is the key.

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What can I do?

In Scotland

There are several divestment initiatives in Scotland, some of them led by students

  • Join the Reinvest Scotland campaign co-organized by Common Weal, Unison Scotland and Friends of the Earth Scotland. The aim of this campaign is for the Scottish territorial councils to withdraw their pension funds invested in shares of the fossil fuel industries and reinvest them in social housing and renewable energies.
  • If you are a university student you can join the People & Planet group. This group has a presence in different Scottish universities including Edinburgh, Glasgow and Aberdeen. They have managed to mobilize their universities to withdraw all or part of all the money invested in fossil fuels.

Any of these organizations named above may provide you with information if there is a campaign group in your locality.

You can also take steps personally, such as:

 

In Spain

In the Spanish state the movement for divestment in fossil fuels started in 2014. There are also many other options to keep the flow of money safe from uncertain speculations. Here are some of the actions you can take to gain more control over how your money is invested

 

In Latin America

In many Latin American countries, such as Colombia or Brazil, the fossil fuel industry is financed by investments from pension funds or other financial assets of European countries or other countries with more developed economies. There are many actions that can be carried out such as signing petitions or participating in local campaigns. Some examples of actions may be:

In Colombia:

  • Contact the group of Friends of the Earth Colombia CENSAT Agua Viva.
  • Sign petition to avoid diversion of Bruno Brook in La Guajira Colombiana. The multinational Cerrejón has received all the permits of the government to divert it in order to extract more than 35 million tons of Coal that is in the bed of the stream. During the last 30 years in the peasant communities of La Guajira they have suffered very tragic impacts due to the displacement caused by the exploitation of El Cerrejón, the largest open pit coal mine in the world. El Cerrejón mine has obtained investment from the Scottish Parliament’s pension funds.
  • From the UK you can also participate in some solidarity groups. Get in touch with London Mining Network to see how you can support this campaign.

In Brazil:

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Use of Spanish for advanced Anglophone students

(1) Greenhouse Effect

Definition: Increased atmospheric temperature due to the heat radiation produced by the carbon oxides released from industrial combustion.
Example: “This gas is mainly responsible for the greenhouse effect and consequently, for global warming.”
Translation: Este gas es el principal responsable del efecto invernadero y en consecuencia, del calentamiento global”.
Comment: Interestingly, the greenhouse is the enclosure where plants are cultivated to protect them, in other words, this is the house for plants. In English “green” is often used as a synonym of environmental or ecological. Pay attention the literal translation from Spanish into English “winter house”, which could be confusing, because literally would mean the house where someone spend the winter time.

(2) Stock market index

Definition: A stock index corresponds to a statistical record usually composed of a number, which tries to reflect the variations in value or average returns of the shares that compose it.
Example: “An example of these initiatives is the stock index created by the Environmental Investment Organization […]”
Translation: Un ejemplo de estas iniciativas es el índice bursátil creado por la Organización de Inversión Medioambiental […]”
Comment: The adjective stock market comes from “stock market” pay attention not to use “bursary” as a close spelling to the Spanish spelling “bursátil”. “Bursary” often means a grant or scholarship.

(3) Open-cast

Definition: Something (in this case the mine) that is exposed on the surface and is not underground.
Example: “[…] the world’s largest open-cast coal mine.”
Translation: […] la mina de carbón a cielo abierto más grande del mundo.”
Comment: Both “open-cast” and “cielo abierto” are adjectives that are often used in mining.

(4) Non-binding

Definition: An agreed resolution that does not hold any legal requirement.
Example: “… to curb the foreseen and imminent climate cataclysm by signing a non-binding treaty, the Paris Agreement.”
Translation: […] para frenar el pronosticado e inminente cataclismo climático firmando un tratado no vinculante, el Acuerdo de París.”
Comment: “Link” and “To bind” are sometimes synonymous but not always, they usually link topics or people to facts, but do not link objects, for example “how to bind paper” is like “bind papers” but not as “Linking papers” the same happens in Spanish with “vincular” and “unir”.

(5) Framework

Definition: Structure, organization, context.
Example: “[…] explains current geopolitics with the framework of international relations and conflicts between producer and consumer regions.”
Translation: “[…] explica la geopolítica actual con el entramado de relaciones internacionales y conflictos entre regiones productoras y consumidoras.”
Comment: The literal translation of “framework” is “marco” although in many cases when highlighting the circumstances of an event it would be more appropriate to use “contexto”.

(6) Livelihood

Definition: Food and maintenance of what is necessary to live on.
Example: “[…] destroying the livelihood of the inhabitants of the areas where they operate, according to the organization.”
Translation:  “[…] destruyendo el sustento de los habitantes de las zonas donde operan, según la organización.”

(7) To appease

Definition: Put in peace, quiet.
Example: “The political will of governments is necessary to appease investors’ short-term appetite and reorient the energy transition.”
Translation:La voluntad política de los gobiernos es necesaria para apaciguar el cortoplacista apetito de los inversores y reorientar la transición energética.”

 

 

Autor: Jordi Albacete

I am an environmental journalist. My passion for the protection of human and environmental rights has been inspired by research led journalism. My ambition is to communicate and inspire people to make positive changes in the environment. Twitter @albacetejordi or Linkedin.

Periodista medioambiental. Mi pasión por la protección de los derechos humanos y medioambientales se ha forjado a través de la investigación periodística. Mi objetivo es comunicar e inspirar a la gente para hacer cambios positivos y proteger el medioambiente. Twitter @albacetejordi o Linkedin.

3 opiniones en “Divesting Savings to Mitigate Global Warming”

  1. Great article! While I am generally skeptical of movements that call for individual action as a way to solve systemic problem, divestment is one I can get behind. A big part of divestment is educating ourselves about our banking institutions and how they are investing on our behalf. When I started saving for my son’s education, I contacted my bank and asked them where they were investing our money. That conversation led me to change to a credit union who offered an ethical investment portfolio.

  2. Really enjoyed this article, very interesting and informative. I think we should have access to the information about our investments in the stock market so we can make an informed choice. Personally, I would prefer to invest in renewables and ethical business.
    Thank you for the call to actions in Scotland, I will be investigating and finding out more about what we can all do.

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