Fossil fuel divestment booming, with $2.6trn in assets set to be dumped

The global shift away from investment in heavy-polluting fossil fuels has grown 50-fold over the past year, according to new analysis, with an estimated $2.6 trillion in coal, tar sands and other polluting assets now flagged for divestment by 430 institutions and 2,040 individuals.

The numbers, released on Wednesday in a report by US consultancy Arabella Advisors, reflect the increasingly convincing economic argument for avoiding fossil fuel investments, as the world’s carbon budget tightens in the fight against climate change, and as renewable energy technologies fall in cost.

Indeed, recent financial analyses from HSBC, Citigroup, Mercer, Bank of England and the International Energy Agency all indicate a significant, quantifiable risk to portfolios exposed to fossil fuel assets.

Because of this, and because of tireless campaigning from non-profit groups like 350.org, divestment from fossil fuels is now on the agenda for governments and investors from 43 countries and multiple sectors, according to the report, including pension funds, health, education, philanthropy, faith, entertainment, climate justice and municipalities.

“The movement has grown beyond mission-driven institutions as large and influential organizations from new sectors are divesting their assets of fossil fuels,” the report says.

“Large pension funds and private companies now account for over 95 percent of the assets of those committed to divestment.

“Overall, the average total assets of a divesting institution has increased nearly thirty-fold, signaling the movement’s expanded reach among large investors. In 2014, institutions pledging to divest held $349 million in assets, on average. Today, such institutions hold $9.8 billion in assets, on average.”

Among some of the more notable commitments made recently are the California Public Employees’ Retirement System, the Norway Pension Fund, the Canadian Medical Association, the World Council of Churches, and the University of California.

In Australia, the University of Sydney revealed plans to cut the carbon footprint of its investment portfolio by 20 per cent in three years; following the lead of the Australian National University, which last year dropped $16 million worth of shares in seven resources companies including Santos, Sandfire Resources and Oil Search.

The report also notes that the Australian Capital Territory has passed a divestment resolution, as has the city of Newcastle, “home to the largest coal port in the world.”

All up, Australia is represented quite well in the report, as host to 10 per cent of divesting foundations. The majority, 64 per cent, are based in the US, and 20 per cent are based in the UK. Other foundations are based in Canada, France, Germany, the Netherlands, and Senegal.

May Boeve, executive director of 350.org, says that the numbers from the Arabella report show the divestment movement is catching fire.

“Since starting on the campuses of a few colleges in the US, this movement has struck a chord with people across the world who care about climate change, and convinced some of the largest and most influential institutions in the world to begin pulling their money out of climate destruction.

“That makes me hopeful for our future, and it’s sending a clear message to world leaders as they head into Paris: It’s time for them to follow suit, and divest our governments from fossil fuel companies too,” she said.

“The Arabella Report shows that more and more investors are reducing their carbon risk today and diversifying their portfolios with the goal to harness the upside in the sustainable clean growth industries of the future,” said Thomas Van Dyck, managing director and financial advisor at SRI Wealth Management Group.

“That underscores what I see every day as a financial advisor–that the demand for fossil-free investment products is increasing.”

UNFCCC executive secretary, Christiana Figueres, agrees: “Investing at scale in clean, efficient power offers one of the clearest, no regret choices ever presented to human progress,” Figueres said in a video statement at a press conference in New York at the unveiling the Arabella Advisors report.

The United Nations climate chief has been advocating for the shift of investment flows from fossil fuels to climate solutions to meet the $1-trillion-a-year need for clean energy investment–and to create momentum ahead of the upcoming international climate negotiations in Paris this December.