We believe that fossil fuel divestment is the most effective way to decarbonise the energy sector. So why is divestment the way to go? We take you through the key arguments for fossil fuel divestment.
- Fossil fuels are driving the climate crisis
The Intergovernmental Panel on Climate Change (IPCC) reports that fossil fuels are the dominant cause of global warming and in 2018, 89% of global CO2 emissions came from fossil fuels and industry.
- Most fossil fuels must stay in the ground
The science is clear, if we extracted all the oil, gas and coal in the world’s active and under construction projects would take global emissions far beyond safe climate limits. Yet, rather than putting the breaks on fossil fuel extraction, the world is on track to produce about 120% more than would limit global warming to 1.5°C.
- Engaging with fossil fuel giants isn’t working
One of the main arguments for continued investment in fossil fuel companies goes something like this:
“If we divest, someone else will just take our place. Isn’t it better to keep investing in fossil fuels and use our efforts to persuade them to switch to renewables?”
However there is no evidence that engagement is effective in persuading big fossil fuel companies to transition to renewables. The reality is that that despite their glossy adverts, the top fossil fuel companies still invest no more than 3% total capital expenditure on renewables each year. Oil change international released a report last year uncovering the truth behind their net zero promises (see table below) and it’s pretty sobering.
Clearly engagement hasn’t succeeded in provoking the type of action needed by fossil fuel companies and continued investment in them legitimises their substandard efforts. By divesting from fossil fuel companies, we stigmatise the industry, taking away their social licence to continue extracting fossil fuels and reducing their political influence.
Even if we were able to persuade fossil fuel companies to speed up the switch to renewables, the question remains, do we want these companies to drive the transition? Whether its lying for decades about the impact of fossil fuels on global warming, engaging in modern slavery thorugh prison labour, dumping billions of gallons of toxic waste in the ecuadorian amazon or colluding with governments to oppress minority populations and supporting abusive regimes, the track record of world’s major fossil fuel companies shows that they cannot be trusted to drive a transition towards an energy sector rooted in respect for people and planet.
By empowering big energy companies to drive decarbonisation of the energy sector we undermine the potential for a Just Transition. While Scotland was once hailed as having the potential to become the new Saudi Arabia of renewable energy, this has not transpired. Instead, large energy companies with no interest in the local community have repeatedly outsourced construction of renewable energy infrastructure to foreign companies where labour is cheaper, tax is lower and labour rights are less stringent.
We also can’t rely on renewables as a silver bullet for the climate and ecological crisis. Unless we transform our economy away from one based on capitalist growth and extractivism and significantly reduce our energy consumption we risk replicating old patterns of ecosystem destruction through the extraction of minerals for renewable technology. A democratised, decentralised energy system which allows control and ownership of renewable resources to reside in the community could drive the just transition to an ecologically sound energy sector that builds community wealth. But this level of transformation is never going to happen if we keep investing in the companies who have most benefited from business as usual.
- Fossil fuels are no longer safe investments
There is the risk of ‘stranded assets’ caused by continuing to invest money in fossil fuel reserves which can never be burned, known as the “carbon bubble”. It has not been a good year for the fossil fuel sector with oil majors BP and Shell reporting record losses, reducing dividends and laying off thousands of workers. And the future is no brighter… According to CarbonBrief, the world has already reached peak oil demand and BPs own 2020 outlook suggests declines of at least 10% by 2030 and as much as 50% by 2040. We have already seen major financial losses related to pension fund investments in fossil fuels with Scottish councils losing £194 million in 2020. All the while the renewables sector continues to grow.
- For Climate Justice : to show solidarity with those on the frontline of environmental impacts
While it’s true that everyone will be affected by the climate, we are not “all in this together”, as the effects of the climate crisis will be much greater for frontline communities, many of which contributed the least to the problem. Last year saw unprecedented wildfires in Australia and California, plagues of locusts across Kenya and super cyclones in India and Bangladesh. Environmental defenders continue to be threatened, imprisoned and murdered for their activism. To show solidarity with these people, pension funds must stop using our money to invest in companies that are causing them harm.
- To show climate leadership as hosts of COP 26
This year COP 26 will take place in Glasgow where important decisions will be made on how we will meet our global climate targets. It really is make or break so we must take bold and far reaching steps to show climate leadership at this important moment in the history of climate action.
- To reinvest in climate solutions
A fat pension will provide little comfort if we spend our retirement years enduring economic, social and environmental crises and worrying about the futures of our children and grandchildren. Wouldn’t it be great if our pension fund contributions could support the regeneration of our ecosystems, the revival of our local economies and the remedies to our social problems? Our pension funds can do better! For example as part of Preston Council’s community wealth building approach to regenerate their local economy, the council has placed a £100m investment by their local government pension fund in student flats, hotels and office space. North Ayrshire also recently adopted the community wealth building approach and council leader Joe Cullinane has previously voiced support of pension fund investment as a means to raise funds for the initiative. Divestment of Strathclyde pension fund could free up funds for more socially and environmentally responsible investments like this.
