For the leaders of the divestment movement, which encourages institutional investors to sell off their shares in fossil fuel companies, winning isn’t everything. Eroding public support for the sector has been considered valuable work in itself. But after a decade of determined lobbying, the divest side is suddenly doing a lot of winning.
Just before the launch of COP26, the UN climate conference in November, the DivestInvest network calculated that endowments, portfolios and pension funds worth nearly US$40 trillion have now committed to divesting their fossil fuel holdings. That tally, they noted, is bigger than the combined GDP of the U.S. and China. From the US$16-billion Ford Foundation (the ultimate fossil fuel fortune) to Quebec’s giant pension fund, the Caisse de dépôt et placement du Québec, 1,485 institutions have now committed to some form of fossil fuel divestment.
And this fall, research out of the University of Augsburg in Germany has concluded that divestment isn’t just chipping away at the fossil fuel sector’s social capital. “Divestment can lead to more sustainability in the real economy,” said Martin Rohleder, the university’s chair of finance and banking, calling it “the first empirical evidence on the impact of divestment.”
The researchers found that divestment by equity funds can “exert sufficient selling pressure to cause the stock prices of climate-damaging stocks to fall in the long run,” said Rohleder.
Over a four-year period, the divested firms reduced their carbon emissions, while emissions from non-divested firms grew by 10%. Their conclusion: “Overall, our findings support the divestment movement’s hope that a critical mass of investors is able to reduce carbon emissions.”
The findings should no doubt add fuel to the movement’s fire. While the divestment movement was largely born on campuses decades ago, some big names have finally joined the divestment deluge in the latter half of 2021 – including California State University, Loyola University in Chicago, Harvard and the University of Toronto. U of T’s multifaceted divestment plan, announced in October by president Meric Gertler, offers a vision of what’s possible. Gertler said U of T will divest from all direct investments in fossil fuel firms within 12 months, and divest from pooled investments by 2030.
The university will allocate 10% of its $4-billion endowment to sustainable investments by 2025 (the “invest” side of DivestInvest). U of T is also the first university to join the U.N.’s Net-Zero Asset Owner Alliance, a global group committed to setting increasingly stringent emission targets on the road to net-zero.
Of course, revolutions can get messy.
In July, a new organization called University Pension Plan (UPP) assumed management of $10.5-billion worth of pension plans from three Ontario universities: Toronto, Guelph and Queen’s. UPP’s CEO, Barbara Zvan, helped develop sustainable investing protocols at Ontario Teachers’ Pension Plan, one of Canada’s largest pension funds. She calls responsible investing “a non-negotiable ... It’s now simply good governance, and a condition for long-term value.”
But Zvan is under fire from 100 faculty and staff demanding that UPP divest from fossil investments, reallocate those funds to climate solutions and adopt “robust climate-related engagement criteria” for all investee companies. The activists claim many universities are discouraged from divesting by funders and alumni who work in the fossil fuel sector – and that UPP’s fresh start gives it a chance to “redefine best practices” in the sector by fiercely embracing divestment.
Zvan says it’s too soon for such specific action. Recently, she praised institutional investors’ potential to “engage” with fossil-fuel companies to drive change – a step the divestment movement dismisses as fantasy, as well as a common stalling tactic.
The struggle continues.