Fossil Fuel Divestment Spreading Faster Than Any Previous Campaign – Even Apartheid

by Silvio Marcacci

.

Fossil Fuel free
Fossil fuel divestment logo via 350.org

It may seem like a slow build, but the fossil fuel divestment campaign is growing faster than any previous divestment campaign and poses significant risk to coal, oil, and natural gas firms.

These findings come from “Stranded assets and the fossil fuel divestment campaign: what does divestment mean for the valuation of fossil fuel assets,” a new study from the University of Oxford.

Oxford reports 350.org’s fossil fuel divestment campaign is gaining traction faster than previous divestment efforts against Apartheid, tobacco, and pornography, posing a serious reputational risk to the world’s biggest fossil fuel companies.

Small Direct Financial Impact – With One Exception

The report seeks to answer the central question facing fossil fuel divestment campaigners: Can their efforts create a direct impact on some of the world’s richest and most powerful companies?

In terms of pure dollars, the answer is no, not really. Oxford’s researchers concluded that of the $12 trillion in assets among university endowments and public pension funds, the largest potential limit of divestment is between $240-600 billion, with another $120-300 billion in debt.

Those figures translate to about 2-3% fossil fuel equity exposure for US university endowments, 4-5% for UK university endowments, and 2-5% of public pension funds. Hence, the recent Aperio Group analysis that found fossil fuel divestment only increases ordinary market risk for higher education by less than 0.01%

University endowment fossil fuel exposure
University endowment fossil fuel exposure chart via Oxford University

This also means the direct impacts of fossil fuel divestment on equity or debt for fossil fuel companies will be limited at best, and their share prices are “unlikely to suffer precipitous decline” because divested stock will likely find neutral investors.

One exception stands out from this finding – coal. Oxford reasons the devaluations of coal companies will be more substantial because while they only represent a small fraction of overall fossil fuel market capitalization, they’re much less liquid and alternative investors are less likely to be found than for oil and natural gas stocks.

But Stigmatization Is A Major Threat To Companies

However, while the direct financial impact of divestment by major investment and pension funds on fossil fuel entities is small, the researchers believe stigmatization – the potential reputational damage upon targeted companies – can have big financial consequences.

“The outcome of the stigmatization process, which the fossil fuel divestment campaign has now triggered, poses the most far reaching threat to fossil fuel companies and the vast energy value chain.”

Oxford contends that stigmatization creates a negative image for firms and scares away suppliers, subcontractors, potential employees, and customers, which in turn leads shareholders to demand management changes and can bar stigmatized firms from competing for new business or completing mergers.

In addition, stigmatization can lead to restrictive new legislation by governments – a trend found in every existing divestment campaign. For fossil fuel companies, this could translate into a carbon tax or other law that would reduce their corporate valuation, and “a handful of fossil fuel companies are likely to become scapegoats.”

As a result, stigmatization from divestment has a multiplying effect on the larger campaign, increasing the negative perception of holding investments in target firms and speeding up results of the overall campaign.

Fossil Fuel Divestment Happening Faster Than Ever Before

Which all brings us back to 350.org’s fossil fuel divestment campaign. Oxford finds three waves of any divestment campaign: reach religious groups and public organizations; then reach universities, cities, and public institutions; then reach an international market.

3 waves of divestment campaigns
3 waves of divestment campaigns graph via Oxford University

Compared to previous campaigns, Oxford concludes 350 is ahead of the typical curve. “From the perspective of the three waves of divestment the fossil fuel campaign has achieved a lot in the relatively short time since it’s inception: 6 colleges and universities…along with 17 cities, 2 counties, 11 religious institutions, 3 foundations, and 2 other institutions,” said report author Ben Caldecott.

But perhaps most significantly, Oxford’s analysis doesn’t fully consider the pending $6 trillion carbon bubble that could lead to rapid devaluation of fossil fuel stocks that could happen if the international community heed’s the IPCC’s carbon budget warning, or if the 60 carbon pricing systems worldwide take hold and force proven assets to stay in the ground, unburned.

Repost.Us - Republish This Article

This article, Fossil Fuel Divestment Spreading Faster Than Any Previous Campaign – Even Apartheid, is syndicated from Clean Technica and is posted here with permission.

About the Author

Silvio Marcacci Silvio is Principal at Marcacci Communications, a full-service clean energy and climate-focused public relations company based in Washington, D.C.

.

Related Posts

Power plant emissions

Carbon Markets Cut Emissions 17x Cheaper Than Subsidies

Global carbon budget

World’s Carbon Budget To Be Spent In Three Decades

UCC members praying

United Church of Christ Puts Its Faith In Fossil Fuel Divestment

Green goods market growth

The Big Green Business Opportunity For America’s Economy

7 thoughts on “Fossil Fuel Divestment Spreading Faster Than Any Previous Campaign – Even Apartheid

  1. John Robinson October 11, 2013 / 06:02

    While immersed in the Officer Candidate Program, Marine Corps, Quantico, 1967, several of us newly minted Lieutenants would amuse ourselves by observing the antics of the anti-war protestors that would periodically appear in DC. The most hilarious event occurred during an October event when a mob, estimated size 50 to 60 thousand, converged on the Pentagon. Their mission, surround the Pentagon, hold hands, chant and levitate it. I’m not making this up.
    The fossil fuel divestment campaign is reminiscent of this excercise in futility. The South Africa Apartheid divestment program accomplished nothing other than generate some publicity. Divesting Endowment Funds of fossil fuel oriented equities, MLP, ETFs, etc. would be irresponsible.

  2. John Brian Shannon October 11, 2013 / 14:24

    Hi John,

    Thank you for serving your country as a U.S. Marine officer.

    Yes, the 1960’s were different, weren’t they? But a lot of things are different nowadays.

    For example, the U.S. military is saving millions of dollars per year by switching to renewable energy. One such example is the U.S. Navy’s China Lake facility (NAWS) which will save the Navy $13 million dollars over 20 years, on its electric bill — just by giving up some barren, unusable land on its base. It has a Power Purchase Agreement (PPA) with a local utility company, which is becoming a normal state of affairs.

    See my article on this here: http://www.huffingtonpost.ca/john-brian-shannon/solar-power-military_b_1272424.html

    There are many such examples occurring throughout the U.S. military.

    Coal can no longer compete with natural gas, and companies like Shell have predicted that natural gas is merely a “bridge fuel” to get us to 95% solar by the end of the century.

    Here is a link to Royal Dutch Shell’s NEW LENS SCENARIO report: http://www.shell.com/global/future-energy/scenarios/new-lens-scenarios.html

    Best regards, John Brian Shannon “SPOOKY”

  3. John Robinson October 14, 2013 / 13:37

    The Defense Department is also running several demonstration projects on its bases, testing ways to produce and distribute electricity better. And the Army recently put out a request for proposals for $7 billion in renewable energy projects, part of reaching its goal of getting a gigawatt of its electricity — enough to power roughly 250,000 American homes — from renewable sources by 2025. Military officials say that their purchases of small amounts for testing has already helped reduce the cost. In 2009, the Pentagon spent roughly $424 a gallon on algae oil from Solazyme. Biofuels are disproportionately more expensive than conventional fuels. A gallon of biofuel costs $26, whereas the Department of Defense purchases diesel at about $3.60 per gallon. New York Times,Military Spending on Biofuels Draws Fire,August 27, 2012.

  4. John Robinson October 14, 2013 / 20:37

    I find lobbying colleges to divest themselves of fossil fuel investments movement both interesting and amusing. Several years ago I read an article the subject of which was California’s Socially Responsible Investing policy and it’s adverse impact on the state’s Pension Fund, CalPERS. Screening for responsibility generally excludes those investment avenues and companies whose policies and practices are considered harmful for the social environment. Generally companies involved in manufacture and sales of products like tobacco, alcohol, gambling, and arms and ammunition, are filtered out in socially responsible investing. Now it is axiomatic that whatever California’s policies are on all things environmental, renewable energy and pension fund management will be 180 degrees out of phase with reality. Having converted my 401(k) plan to a self directed account I invested in some tobacco stocks. Good Move. Finally I’m of the opinion the Socially Responsible Investing is, by definition, irresponsible.

  5. John Robinson November 5, 2013 / 13:48

    The health and uninterrupted functioning of international Fossil Fuel Markets determines the totality of life on this planet. That is the natural order of things today. That is the atomic and subatomic and galactic structure of things today! There is no America. There is no democracy. There is only Exxon Mobil, and Chevron, and IBM, and Google, and AT&T, and DuPont, Dow, and Union Carbide. Those are the nations of the world today. We no longer live in a world of nations and ideologies. The world is a college of corporations, inexorably determined by the immutable bylaws of business. The world is a business, it has been since man crawled out of the slime. And our children will live, to see that… perfect world… in which there’s no war or famine, oppression or brutality, no Anthropogenic Climate Change. Only one vast and ecumenical holding company of fossil fuel conglomerates, for whom all men will work to serve a common profit, in which all men will hold a share of stock. All necessities provided, all anxieties tranquilized, all boredom amused, all IPhone GPS tracking disabled.

  6. John Robinson December 7, 2013 / 10:57

    SPOOKY as in the 130 Gunship that replaced PUFF THE MAGIC DRAGON?

  7. John Brian Shannon December 8, 2013 / 04:35

    No, “SPOOKY” as in the name painted on the side of the F-4 Phantom C, D, E and Wild Weasel variants that I flew in Vietnam and after.

Send us your thoughts!

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s