Can the divestment movement tame climate change?

An increasingly popular tool in the fight against climate change is emerging - "divestment". The term refers to the shedding of stocks, bonds or other investments, in this case that are held in companies that produce or burn fossil fuels. As the world's leaders prepare for a make-or-break climate summit in November, will divestment change our relationship with fossil fuels - and what might the dangers be, asks our social affairs reporter John McManus?

It began with a campaign on US university campuses.

Students and academics, worried about the predicted impact of climate change, started lobbying university authorities to move their investments from companies that extracted fossil fuels from the Earth.

Most scientists say that the burning of fuels like coal, gas and oil is the main driver of climate change, and that cutting back on them is inevitable.

Yet the companies that locate and extract fossil fuels form part of a multi-billion dollar industry.

The divestment strategy has two objectives.

First, there's a financial imperative, where campaigners say withdrawing funds and support from energy companies makes it much harder for them to operate in the marketplace.

Secondly, divestment can, to a certain extent, "stigmatise" certain industries, making them unpopular with wider society.

The movement is growing.

The latest institution to join is The Royal Australasian College of Physicians, which represents 21,000 medical practitioners. It's divesting about £1.2m of fossil fuel interests from its £45m endowment.

A spokesperson said the college's reasoning was clear: "Since the RACP is a health organisation with an objective of improving the health of our population, divestment is an important action that leads to reduced carbon outputs and achievement of our health objective - to ensure better health outcomes for our patients into the future."

Divestment is closely related to the concept of "Carbon Risk".

Campaigners point out that fossil fuel reserves that haven't yet been extracted are thought to equal five times the amount of carbon that can be burnt if climate change is to be limited.

Burn while you can

Yet oil, gas and coal producers are still factoring in the burning of those reserves when calculating their companies' financial worth.

A recent report by Deutsche Bank pointed out that any deal on emissions at an upcoming November gathering of world leaders "means accepting that the entirety of the world's known fossil fuel reserves cannot be extracted and burned".

The authors say that this means that oil producers will try to maximise the benefit from their product while they still can - which is why the oil cartel Opec is refusing to cut production, even though prices remain low.

The divestment strategy has been modified from earlier campaigns, most notably the anti-apartheid movement.

Campaigners from that era credit divestment - and the effect it had on South Africa's economy - as one of the drivers that brought white politicians to the negotiating table, and resulted in the eventual collapse of the apartheid system.

Even some of those who might be thought to be avid supporters of fossil fuel producers have come out in support of divestment.

Sir Mark Moody Stuart, formerly of Shell and the mining company Anglo American, says it is "rational" because of the industry's lack of progress on climate change.

Growing demand

Shell's current CEO, Ben van Beurden, has criticised divestment, though, most recently in February in a speech during International Petroleum Week, saying energy could make the difference between poverty and prosperity.

While acknowledging the reality of climate change, he said "demand is growing. There will be more people on this planet, more people living in cities and more people rising from poverty.

"They all have a right to energy, a right that should not be denied."

Mr van Beurden also addressed concerns that some of Shell's untapped assets - unextracted oil, for example - would be rendered worthless, saying that future investments had already factored in the potential higher cost of carbon emissions.

Other critics, such as John Gapper, a columnist for the Financial Times, have also pointed to flaws in the targeting of the divestment campaign.

Why, he wrote, should energy producers like Exxon be vilified, while others such as Apple, which "produces millions of electronic devices, escape?"

Indeed, others have pointed out that campaigns against tobacco companies worked by persuading smokers to give up cigarettes - so shouldn't climate change groups work to make individuals give up or cut their personal energy consumption?

There's also the fact that many people depend on fossil fuel companies for their livelihoods - whether as employees, or as the recipients of the pension funds invested in them.

Some of those who've already divested from energy companies, or have promised to do so, include the $900bn sovereign wealth fund of Norway, which is selling shares in coal companies; the Church of England, which has also divested from coal and tar sands oil; and the Rockefeller Brothers Fund, a charitable trust run by the heirs of John D Rockefeller, the famous oil baron.

Smaller institutions are also involved, such as the London-based Frederick Mulder Foundation, which dispenses grants to combat poverty and climate change.

The foundation's Eugenie Harvey says it has signed the "Divest Pledge", committing to using its funds to fight climate change. She denies, though, that campaigners want to immediately shut down oil or coal businesses.

"It doesn't mean those companies will go out of business. But it removes their social licence, in the same way South African businesses were boycotted during the apartheid era.

"It isolates, raises awareness, and condemns."

Not everyone agrees, however.

Fiona Reynolds is managing director at Principles for Responsible Investment, an NGO founded by the former UN Secretary-General Kofi Annan. It provides a platform for investors who want to integrate environmental and social concerns into their businesses.

Ms Reynolds says that despite the divestment campaign, the world will still be using fossil fuels for three or four decades while cleaner sources of energy come online.

She thinks those fuels should be reserved for the industries that really need them - such as aviation - and she also wants investors to think twice about divestment.

"From an investor's point of view, it's better if they stay engaged with companies, and talk to them about transitioning to a low-carbon economy."

That could include solar and wind power, with investors being early adopters of new technology.

In November, world leaders will travel to France for the United Nations Climate Change Conference, to negotiate on a legally binding agreement to limit global warming to below 2C above pre-industrial average temperatures.

If the divestment campaign has grown even larger by then, the civil society activists may well steal a march on the politicians in Paris.