Briefings

New research on the financial impacts of fossil fuel divestment

Our partners in 350 have shared some recent research on the financial impacts of fossil fuel divestment with us (thesis PDF,thesis summary PPT). This research was undertaken by Alison Shulz of the University of Kassel, Germany. It should be noted that the primary focus of the divestment-reinvestment campaign is on social impacts: discrediting the fossil fuel industry to remove their social license to operate. So financial impacts, where they exist, are in a sense a bonus. Here are some of the headline conclusions of the paper:

– The direct, short-term impact of divestment (if any)…

• Theoretically, a direct effect of divestment should result from limited risk sharing (Merton) and the fact that assets can only be sold at a discount (Miller)

• Empirically, announcement to divest from a specific company has no effect on this specific company’s stock price

• This effect is however present for coal firms which mainly operate in markets of the Global North

• Divestment announcements are found to have a negative impact on stock prices of the whole fossil fuel sector

• This effect is even more pronounced for financially motivated divestment and large divested sums

The long-term impact is still unclear.

It should be noted that this is an under-researched area. It’s our impression that this research does not include the likely additional positive impacts of capital which is diverted from fossil fuels directly into renewable energy or other ethical investments.

Fossil Free UCT campaign submits testimony on divestment to the UCT Institutional Reconciliation and Transformation Commission

The aims of the UCT Institutional Reconciliation and Transformation Commission (IRTC) include making ‘recommendations on institutional culture, transformation, decolonisation, discrimination, identity, disability and any other matters that the university community has raised over the past 18 months, or may wish to raise in the future.’

In the light of this mandate of the IRTC, we offer a submission from the Fossil Free UCT campaign (which includes the Green Campus Initiative and Climate Action Project, supported by Fossil Free SA) arguing that the University of Cape Town needs to move quickly to ethical and responsible management of its investments. In particular, in the light of the massive human rights crisis posed by climate change, UCT must immediately adopt bold targets for ending its investments in fossil fuel companies.

Summary of recommendations

We note that UCT is to be commended for being the first African university to adopt a responsible investment policy, but that the university can and should act more whole-heartedly. UCT should become a pro-active and visionary leader on issues of ethical and responsible investment. It must take specific, urgent measures (outlined below in our recommendations) to end its tacit support of fossil fuel corporations, and initiate divestment from fossil fuels. It should also address other ethically questionable investments, such as those in tobacco, while accelerating work to reduce on-campus environmental impacts.

Continued inaction, especially as the divestment movement grows in SA, threatens to leave UCT looking tardy and unresponsive given how long it has been aware of the issues.

The full document, including detailed recommendations for action, can be downloaded here (pdf): Submission to the UCT IRTC from the Fossil Free UCT campaign

 

#KnysnaFires and #Capestorm should make South Africans think twice about their savings/investments in fossil fuel companies

Cape Town, 8 June:– It’s difficult to directly link individual extreme weather events like the Cape storm and Knysna fires to climate change.

But ever-increasing extreme weather events like these – and the Cape Town drought – are very much what has been predicted by scientists studying climate change.

Climate change is caused by global warming resulting from carbon dioxide emissions, most of which comes from burning oil, gas and coal.

In South Africa, most of this comes from Eskom, Sasol, and the rest of our coal industry: companies like Anglo Coal, Exxaro, BHP Billiton, Xstrata, Oakbay, and others.

Globally, companies like Shell, BP and Exxon Mobil work to block the development of cleaner energy like wind and solar. Even economics textbooks acknowledge proper climate policies are blocked by the natural resources industries.

If we want a secure future, we should stop investing in these companies.

Around the world, hundreds of institutions (now worth over $5 trillion), led by universities, but including cities like Paris, Melbourne, Oslo and Copenhagen are stopping their investments in fossil fuels.

It’s time to divest in South Africa. Tell your financial services provider you no longer want to be invested in destroying your own future, or in old energy companies that are rapidly losing value in the face of climate change regulation and energy technology change.

Tell your company pension fund trustees you no longer want to be invested in destroying your own future.

#Divest from fossil fuels. Invest in a sustainable future.

Subscribe to Fossil Free SA’s mailing list for more details. Read more about the scope and scale of the global divest-invest movement at gofossilfree.org/commitments.

UCT’s divestment think tank

This is the summary of the UCT divestment think tank held on 15 May 2017 at Hlanganani Junction, UCT.

Fossil fuel divestment in itself is a strong signal that will notify internal and external communities throughout all sectors, of serious engagement with the topic of responsible investment, future development and planning and transformative action. UCT has an opportunity to send a clear signal that the institution is concerned about the wider impacts of its investments and can lead responsible investment discussion and engagement in response to the climate crisis on the African continent.

Overall, there is consensus for the soon to be appointed ‘UPRI’ team (extended name unknown) to work actively towards a low carbon, responsible investment governance structure and policy document to be adopted at the University of Cape Town in response to the climate crisis. Made up of students, staff, executive members and experts, the UPRI will advise the Joint Investment Committee’s financial decision making.

It was pointed out by Dr Max Price that the meeting was missing representatives of the ‘anti-divestment’ argument to provide opposing ideas to the conversations.

The full report on this event can be read here (pdf).

‘No jobs on a dead planet’

Why South African unions should stop investing in fossil fuels and lobby for a just, planned transition to a green economy.

Briefing compiled by Fossil Free South Africa, February 2017. Contact: David Le Page, david@fossilfreesa.org.za / +27845220968. PDF version here

More jobs: Yes, the fossil fuel industry creates jobs, but it also creates climate change, air and water pollution, substantial corruption, wars, social instability, economic crises and fuel shortages, and destroys arable land — all of which destroy jobs and human wellbeing. A greener economy will create more, better, safer jobs. According to the International Labour Organisation (https://goo.gl/rSryng): “…most studies show that a transition to a low-carbon economy will lead to a net increase in employment”. The Australian Council of Trade Unions (ACTU) has argued for “a planned closure of coal power stations – along with both a jobs and energy plan for the country”, saying it will “create a more prosperous and diversified economy”. (https://goo.gl/k4da08). Renewable energy is now capable of powering developing economies, indeed the whole world, without all the terrible costs of fossil fuels.

Threatened investments: Investments in fossil fuels are losing value in many markets. Even if they do not embrace the moral arguments for divestment, unions still have a fiduciary duty to the members whose funds they manage to understand, manage, and where appropriate, divest, to avoid the multiplying threats to investments in the fossil fuel industry. According to BlackRock, the world’s biggest asset manager: “Investors can no longer ignore climate change. Some may question the science behind it, but all are faced with a swelling tide of climate-related regulations and technological disruption.”

Health and the right to life: Researchers at UCT’s Energy Research Centre estimate that 27,000 premature deaths across South Africa annually (7.4% of all deaths) are currently due to high levels of fine PM (microscopic particles), mostly from burning fossil fuels… and often in poorer communities. Even without climate change, we would still need to shut down the fossil fuel industry.

Human and worker rights: Climate change is a profound threat to Africa. Climate change is a human rights issue, already killing hundreds of thousands of African children every year through malnutrition and disease. Climate change threatens food security. It threatens economic growth and stability, and thereby threatens workers’ job and savings.

The fossil fuel industry is facing multiple, critical threats:

  • Renewable energy (especially wind & solar) is now the fastest growing energy industry in the world.
  • China is moving fast to phase out coal, and its coal use has already peaked.
  • By some predictions, electric cars will mostly replace petrol/diesel in 20 years’ time.
  • The 2015 Paris agreement on climate change saw most countries agree to phase out fossil fuels.
  • Even without these changes, in 50-100 years time at the most, all accessible fossil fuel reserves will be exhausted anyway.
  • Transition away from fossil fuels is inevitable, but a managed, just transition is preferable.

Solidarity and tradition: “An injury to one is an injury to all.” The global divestment movement is led by many people of colour and people of faith, constituencies which overlap strongly with the union movement. The union movement has a social and historical responsibility to stand up for social justice, human rights and good governance. The fossil fuel industry, on the other hand, is extremely corrupt, threatening good governance and worker’s rights as well as human health and the environment.

A just transition from fossil fuels to a greener economy

A “just transition” would bring business, labour and government together to plan for a smooth move away from fossil fuels, as energy companies transform their business models. This transition is already beginning in other parts of the world, as, for example, offshore oil service companies move to servicing offshore wind power installations. Proposed ILO guidelines (https://goo.gl/jdaetC) for this just transition include re-skilling and training, social support and economic diversification. (more…)